Saudi Arabia is changing the legal status of state energy giant Saudi Aramco in a sign it is pressing ahead with plans for a 2018 initial public offering that is tipped to be the biggest ever.
The move to bring the state-backed company’s status in line with other Saudi corporations is a concrete step towards a stake sale, though questions remain over the kingdom’s readiness and willingness to list the company internationally.
The kingdom has said it wants to sell 5 per cent of Saudi Aramco in a stock market flotation, as the centrepiece of ambitious plans to reform the country’s economy led by powerful Crown Prince Mohammed bin Salman.
Prince Mohammed believes the listing could value the company at $2 trillion, although industry analysts predict a much smaller figure.
Saudi Arabia expects to list shares on the domestic Tadawul stock exchange but it is also considering a listing abroad. New York, London and Hong Kong are among the venues in the running.
A private sale is also being weighed by Riyadh.
A government document dated December 20 2017 that has been circulating among advisers and lawyers familiar with the IPO preparations said a law specific to Saudi Aramco, which was made 30 years ago and defines its legal status, would be scrapped from January 1, 2018 to bring it in line with other corporations.
The change would also affect wholly-owned subsidiaries of the company, such as some domestic refineries.
According to the document, which has been signed by the king: “Companies wholly-owned - directly or indirectly -by Saudi Aramco are given a grace period of 5 years to adapt their status in order to be in compliance with Companies Law, and the Council of Ministers may extend this period as needed.”
Two people familiar with the IPO preparations said a legal change converting Saudi Aramco into a joint stock company was due to take effect, which would enable the company to sell shares to outside investors.
A third person said the change had already taken place and was “long-planned” in order to allow Saudi Aramco to list on the Tadawul exchange and be regulated by the Saudi Capital Markets Authority according to the same rules as other corporations, it added.