Stocks

Battle for Aramco IPO heats up as exchanges vie for supremacy

Bloomberg August 26 | Updated on August 26, 2019 Published on August 26, 2019

Officials from London Stock Exchange Group Plc, the New York Stock Exchange and Hong Kong Exchanges & Clearing Ltd. have been pitching the oil giant in recent weeks.

The largest global stock exchanges have restarted efforts to court Saudi Aramco as the battle to host the world’s biggest-ever initial public offering heats up again, people with knowledge of the matter said.

Top officials from London Stock Exchange Group Plc, the New York Stock Exchange and Hong Kong Exchanges & Clearing Ltd. have been actively pitching the oil giant in recent weeks, according to the people.

LSE Chief Executive Officer David Schwimmer is among those who have visited Saudi Arabia in the past month to woo Aramco officials, the people said, asking not to be identified because the information is private.

Securing the listing, which Saudi Arabia expects to raise as much as $100 billion in proceeds, would be a coup for the bourses as they tackle low volumes and increased volatility in financial markets. While Aramco is planning a local listing on the Saudi stock exchange as part of the IPO, it hasn’t made a decision on other venues, according to the people.

Bloomberg News reported in July that Saudi Arabia is restarting preparations for an IPO of Aramco, which is the world’s most profitable company. It has already chosen Lazard Ltd.and Moelis & Co. to advise on the listing, people with knowledge of the matter said earlier this week.

Jeddah delegation

Aramco, formally known as SaudiArabianOil Co, didn’t immediately respond to a request for comment. Representatives for LSE and HKEX declined to comment. A representative for the New York Stock Exchange, which is owned by Intercontinental Exchange Inc., also declined to comment.

LSE’s Schwimmer has travelled to Saudi Arabia several times this year, including to speak on a panel at a Riyadh financial summit in April. The former Goldman Sachs Group Inc. dealmaker said at the time he was working closely with the local exchange to help small companies raise external funds.

Schwimmer was also part of a delegation led by Philip Hammond, then the UK’s Chancellor of the Exchequer, that went to Jeddah in early July for the first meeting of the Economic and Social Pillar of the UK-Saudi Arabia Strategic Partnership Council.

Aramco’s first attempt at a listing attracted a flurry of pitches from top global exchanges from New York to Tokyo seeking to host the listing. Smaller bourses, including Singapore and the Toronto Stock Exchange, were also vying for a role. Their hopes were dashed when Aramco put the IPO plans on hold after more than two years of preparations and instead decided to buy a $69 billion stake in local chemical giant Saudi Basic Industries Corp.

Looser Rules

Last time around, potential listing venues offered Aramco a number of inducements as they sought to win the deal. Officials have pitched the idea of a dual listing in Saudi Arabia and Hong Kong in return for anchor investments from Chinese funds, people with knowledge of the matter said earlier.

Hong Kong’s top leader Carrie Lam visited Saudi Arabia in 2017 and promoted the territory’s equity market in meetings with King Salman and senior officials, including the energy minister. HKEX Chief Executive Officer Charles Li has also said that a proposed trading link allowing mainland Chinese investors to put money into Hong Kong IPOs would act as a lure to major foreign companies like Aramco.

London improved its chances when the securities regulator softened its listing regime last year to attract state-owned companies. The rule changes introduced a new category of premium listing rules for state-owned commercial companies, which remove restrictions on shareholder approval for related-party transactions.

New York’s appeal to the Saudis as the financial hub of the world’s largest economy is enhanced by the relationship that the Saudi crown prince, Mohammed bin Salman, has cultivated with US President Donald Trump. Still, Aramco has been evaluating the risk of broader litigation in the US that could emerge, for example, with shareholders lawsuits targeting the company over environmental concerns, people familiar with the matter have said.

Published on August 26, 2019
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