Saudi Arabia's giant state oil company finally kick-started its initial public offering (IPO) on Sunday, announcing its intention to float on the domestic bourse in what could be the world's biggest listing as the Kingdom seeks to diversify its economy away from oil. In its long-awaited announcement, Aramco, the world's most profitable company, offered few specifics on the number of shares to be sold, pricing or the date for a launch. Sources have told Reuters the oil company could offer 1%-2% of its shares on the local bourse, raising as much as $20 billion-$40 billion. A deal over $25 billion would top the record-breaking one of Chinese e-commerce giant Alibaba in 2014. Saudi Arabia's Capital Market Authority (CMA), the Kingdom's market regulator, said on Sunday that it issued a resolution approving Saudi Aramco's IPO. The CMA's approval on the application will be valid for 6 months from the CMA Board resolution date, the regulator said in a statement. "The CMA's approval on the application should never be considered as a recommendation to subscribe in the offering of any specific company," the regulator added. "Today is the right opportunity for new investors to reap the benefits of Aramco's ability to achieve value, and boost it on the long-term," Aramco Chairman Yasir Al-Rumayyan told a news conference at the company's headquarters in the eastern city of Dhahran. The company will spend the next 10 days talking to investors and sounding out their interest and the price range will follow, he said. The IPO is designed to turbocharge Crown Prince Muhammad Bin Salman's ambitious economic reform agenda by raising billions to build non-energy industries and diversify revenue streams in Saudi Arabia. Confirmation of the sale of shares in the oil giant, whose formal name is Saudi Arabian Oil Co, comes about seven weeks after the attacks on its oil facilities, underlining Saudi Arabia's determination to push on with the listing regardless. Aramco said it does not expect the Sept. 14 attack, which targeted plants at the heart of Saudi Arabia's oil industry and initially halved its production, would have a material impact on its business, operations and financial condition. Its net income for the third quarter of 2019 amounted to $21.1 billion, according to Reuters calculations, dwarfing the income for the same period of oil giants like Exxon Mobil Corp , which was just over $3 billion. Al-Rumayyan said the valuation should be determined after the investor roadshow. CEO Amin Nasser told the same news conference that Aramco plans to release the prospectus on Nov. 9. To help get the deal done, Saudi Arabia is relying on easy credit for retail investors and hefty contributions from rich nationals. The Saudi stock market fell 1.7% on Sunday after the Aramco announcement. The benchmark index is down nearly a fifth since May as local institutions sold shares to prepare for the Aramco deal, fund managers and analysts say. Salah Shamma, head of investment, MENA, at Franklin Templeton Emerging Markets Equity, said some local investors could be selling other shares in order to shift investments to Aramco, but this could well be a case of "short-term pain for long-term gain." To comfort investors, Aramco said on Sunday the state will forgo its right to receive a portion of cash dividends on shares, giving priority to new shareholders. Aramco is also cutting royalties it pays to the state. Effective Jan. 1, 2020, it will adopt a progressive royalty scheme, with a marginal rate set at 15% up to $70 per barrel, 45% between $70 and $100, and 80% if the price rises higher. The firm said the Saudi market regulator, which approved the application to list on Sunday, issued an exemption for non-resident institutional foreign investors to subscribe. Saudi investors would be eligible to receive bonus shares — a maximum of 100 bonus shares for every 10 allotted shares. At a valuation of $1.5 trillion, Aramco would still be worth at least 50% more than the world's most valuable listed companies, Microsoft and Apple, which each have a market capitalization of about $1 trillion. The promised listing has had Wall Street on tenterhooks since Prince Muhammad flagged it in 2016. Aramco mandated 27 banks to work on the deal including Citigroup, Goldman Sachs, HSBC, JPMorgan and Morgan Stanley. "I think this is the right time for us to take Aramco to be a public company...we wanna go IPO and we wanna go now," Al-Rumayyan told reporters on Sunday when asked about the timing. Aramco said the IPO timetable was delayed because it began a process to acquire a 70% stake in petrochemicals maker Saudi Basic Industries Corp. IPO preparations were revived this summer after Aramco attracted huge interest in its first international bond sale, seen as a pre-IPO relationship-building exercise with investors. But a listing announcement expected on Oct. 20 was delayed after advisers said they needed more time to lock in cornerstone investors, three sources told Reuters. Aramco said on Sunday it intended to declare aggregate ordinary cash dividends of at least $75 billion in 2020. — SG/Reuters
