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17 November 2019
BUSINESS

Saudi Aramco seeks up to $1.71 trillion in IPO valuation

Proceeds will be transferred to the Public Investment Fund, the Kingdom sovereign fund, which has been making a number of bold investments such as $45 billion into SoftBank’s Vision Fund, taking a $3.5 billion stake in Uber Technologies and planning a $500 billion NEOM city.

BLOOMBERG/MUHAMMED AL NEMER


Saudi Arabia put a preliminary valuation on its state-owned oil giant Saudi Aramco of between $1.6 trillion and $1.71 trillion, short of the $2 trillion target set by Crown Prince Mohammed bin Salman in 2016, reportedBloomberg.

Saudi Aramco is seeking as much as $25.6 billion by selling a 1.5 per cent stake. The company would raise $24 billion if the deal is priced at the lower end—just shy of the $25 billion raised by Alibaba Group Holding—currently the world’s largest IPO. With one-third of the deal reserved for Saudi retail investors, the state-owned energy giant will rely heavily on the local market.

The oil company said that its price will range from SAR 30 to SAR 32 per share, while the final price and valuation on will be published on 5 December 2019.

Additionally, Saudi Aramco will not make offer in the US, Australia as well as Canada, Japan.

Saudi Arabia has been pulling out all the stops to ensure the IPO—a key to the Crown Prince’s economic diversification plan—is a success. The Kingdom reduced the tax rate for Saudi Aramco and is promising a hefty dividend.

Similarly, Saudi Arabia has also negotiated commitments from its wealthiest families to invest in the offering as many international money managers seem ready to pass.

Still, valuation has been a sticking point ever since the Crown Prince first floated the idea in 2016. The oil company has faced a delicate balance by pushing the valuation as close as possible to $2 trillion—a figure that is been met with scepticism from many investors—while making sure it’s attractive to potential Saudi buyers.

Among those considering sizable purchases are the Olayan family and Prince Alwaleed bin Talal.

Saudi Aramco earned net income of $68.2 billion in the first nine months compared with $83.1 billion a year ago, however, the oil company revenue slipped to $217 billion from $233 billion.


RELATED STORIES: ALIBABA GROUP HOLDING CROWN PRINCE MOHAMMED BIN SALMAN IPO SAUDI ARAMCO PUBLIC INVESTMENT FUND OLAYAN FAMILY PRINCE ALWALEED BIN TALAL


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