Aramco IPO: It's a thanks, but no thanks from Malaysia's
Petronas
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[November 23, 2019] By
Krishna N. Das and Clara Denina
KUALA LUMPUR/LONDON (Reuters) - With Saudi
Aramco yet to name any major foreign investors in its upcoming share
sale, Malaysia's state energy company Petronas [PETR.UL] decided to take
a pass on Friday.
Expectations that Aramco customers and allies around the world would
take significant stakes in the company have so far not materialized,
with the listing looking like it will be reliant on local retail and
institutional investors.
Aramco, which kicked off the share sale process on Nov. 3 after a series
of false starts, declined to comment to Reuters on the lack of any named
anchor investors in its listing so far.
Last week Russia's second largest oil producer Lukoil <LKOH.MM> said it
would not be investing in the initial public offering (IPO) which is
likely to rank Aramco as the world's most valuable company.
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Aramco has a joint venture with Petronas in southern Malaysia that is
set to start commercial operations this year and Petronas said it had
been asked to invest in the IPO.
"Petronas would like to confirm that after due consideration, the
company has decided not to participate in Saudi Aramco's initial public
offering exercise," Petronas said in an emailed statement.
Aramco is a major oil supplier to China, Japan and South Korea and their
plans for the IPO are not yet clear, however, the head of Japan's
largest refiner this month said that Japanese companies were unlikely to
invest because it was difficult to ascertain Aramco's true value.
Aramco plans to sell 1.5% of the company, looking to raise up to $25.6
billion and giving the company a potential market value of between $1.6
trillion and $1.7 trillion.
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A logo of a Petronas fuel station is seen against a darkening sky in
Kuala Lumpur, Malaysia February 10, 2016. REUTERS/Olivia Harris/File
photo
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It is the centerpiece of Crown Prince Mohammed bin Salman's plans to diversify
the Saudi economy away from its reliance on oil.
But the company has canceled marketing roadshows for its listing outside of the
Gulf because of the lack of interest from foreign institutional investors.
That has raised questions about to what extent the listing can really diversify
the country's economic interests.
"Just selling a 1.5% stake in an oil company is not really going to achieve an
enormous amount," said Charles Hollis, a former UK-Saudi diplomat and director
at intelligence consultancy Falanx Assynt.
Saudi Aramco said in a statement to Reuters that its listing was "an important
step in accelerating the Kingdom's economic growth and diversification".
"It will increase liquidity in the Saudi capital market and elevate its position
as an important international stock exchange", it said.
Saudi Arabia's Samba Financial Group said on Thursday that the IPO has attracted
about 73 billion riyals ($19.47 billion) in institutional and retail orders so
far.
Although no major state company or fund has yet stepped forward, talks have been
taking place with sovereign investors including the Abu Dhabi Investment
Authority, Singapore's GIC and other funds, sources have told Reuters.
(Reporting by Krishna N. Das; Writing by A. Ananthalakshmi and Rachel Armstrong;
Editing by Kim Coghill and Elaine Hardcastle)
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