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When in October 2016. Crown Prince Mohammed bin Salman announced that the Kingdom’s national oil champion. Saudi Aramco. would go public in 2018. it seemed as though there was all the time in the world to prepare the company for a record-breaking initial public offering on global stock markets. How time flies. As 2017 progressed. the pace of preparation accelerated ahead of that deadline. but it also became apparent that there were challenges in sticking to an unbending plan for the biggest IPO in history. and that the Kingdom had other options as it looked to raise $100 billion from the sale. But amid the debate and uncertainty over the precise eventual form of the IPO. Aramco quietly stuck to its strategic plan: Diversifying away from the being a mere crude pumper to become a diversified energy conglomerate at the center of Saudi industry. as well as a global force in the energy business. That will surely continue. at an even faster pace. in 2018. It was the debate over the IPO that caught the headlines in 2017. however. The master plan to launch a share offering on one international exchange. or more. seemed to have been cemented by the visit of President Trump to Riyadh in May. when the new political and business relationship between the US and the Kingdom emerged. Some analysts reported that there had been a handshake on a deal to float Aramco shares on the New York Stock Exchange at the Riyadh event. and for a while NYSE was the undisputed front-runner in the race to stage the biggest IPO in history. As the year progressed. it began to look rather more complicated than that. Some of Aramco’s own advisers began to worry about the risks attached to a Wall Street listing. where the legal community is notoriously quick to litigate over issues such as terrorism funding. climate change and anti-trust issues. Meanwhile. London — a serious contender for the IPO given its track record in big global flotations — bent over backwards to entice Aramco to the London Stock Exchange. and for a while appeared to have won the support of advisers and some executives. if not the owners. of Aramco. Then. around the Future Investment Initiative event in Riyadh in October. other options emerged as serious alternatives for the IPO. The Tadawul. the Riyadh stock exchange. expressed its confidence that it could stage the issue “exclusively“ on the domestic stage. Aramco also confirmed it was not just limited to a “shock and awe“ global share listing. It had talks with Chinese investing institutions regarding a possible sale of an “anchor“ stake in the company. which would set a price floor for any future sale of shares on public markets. While all this was going on. Aramco executives were busy on the other parts of the strategy. A $20 billion joint venture with Sabic to build one of the world’s biggest petrochemicals plants. possibly at Yanbu on the Red Sea. was a big investment in the downstream business. there were other multibillion-dollar deals in the refining industry in China and elsewhere.
Towards the end of the year. other more radical international expansion plans were suggested. such as a big entry into the American shale industry. or a deal with Russia to bolster Saudi Arabia’s gas supplies. The coming year will show what accuracy there was in those reports. But the news agenda will continue to be dominated by the debate over the IPO — the venue. size and nature of the most important single transaction under the Vision 2030 strategy. Advisers know that these vital issues will have to be decided soon. if there is to be any change of meeting the 2018 IPO deadline. Some expect an announcement on the IPO process within the opening weeks of the new year. For what it’s worth. here is my personal take on what is likely: The announcement of the intention to float on the Tadawul by the end of 2018. in conjunction with the sale of a small stake to foreign institutional investors. with a commitment to a bigger global IPO at a later date. That would set a base price. give Saudi investors a chance to participate in the privatization of the Kingdom’s flagship company at an early stage and (presumably) a preferential price. and also signal a commitment to the ongoing future globalization of Aramco. The sale of shares in Aramco is a complex and significant financial transaction. but it is much more than that. It is the centerpiece of the privatization program that will transform the economic. social and cultural life of the Kingdom over the next 12 years. The coming year will be a momentous one in the history of the Kingdom.
