Business Essentials for Professionals


Saudi Arabia Oil Giant Aramco Transformed Into A Joint-Stock Company As A Requirement For Its IPO Listing

Saudi Arabia Oil Giant Aramco Transformed Into A Joint-Stock Company As A Requirement For Its IPO Listing
The national oil giant Aramco of Saudi Arabia has been turned into a joint-stock company from first January this year. This is being viewed as a crucial measure for the company set to make initial public offerings (IPO) sometime later t his year.  
Saudi Arabia wants to amass money to finance its plan for Vision 2030, a plan by Saudi crown Prince Mohammad bin Salman to draw away the kingdom from its acute dependency on oil. And a large part of that money is expected to bee generated for the proposed sale of up to 5 percent of Saudi Aramco through the IPO.
A cabinet decree in the kingdom’s official bulletin mad the announcement of the of change I the company on Friday. This change in company structure is required by law in Saudi Arabia for local companies planning to issue IPOs, said the media quoting sources with knowledge of the matter.
“As a customary step in the preparation process for a Saudi IPO, Saudi Aramco has converted to a joint stock company,” the source was quote din the media as saying.
“This establishes the framework to allow future investors to hold shares in the company alongside its shareholder, the government.”
There had been speculations in the market that the proposed IPO of Aramco might be delayed or completely abandoned but the change in company structure is a sure shot indication that the kingdom is moving ahead with the IPO which is slated to be the biggest ever in the history and is aimed at raising up to $100 billion.
The company’s bylaws published in the official bulletin show that a fully paid capital of 60 billion riyals ($16.00 billion) is possessed by Aramco which is broken up into 200 billion ordinary shares.
The authority of listing the company in domestic and international markets rests with the board of the company which is expected to composed of 11 members, the bulleting said. While 6 members for the board would be proposed by the government, every shareholder who has a share of over 0.1 percent in the company would also possess the right to propose the name of one board member each.
The company’s chairman would be appointed by the government. Khalid al-Falih, the energy minister of the kingdom is currently the chairman of the company.
The bulletin further said that the final ultimate related to the output levels and production capacity of the company would rest with the government as it would still remain the major shareholder of Aramco.
“The state will remain the only responsible entity to make the final decisions regarding the maximum levels of hydrocarbons that can be produced at any time,” it said.
Major international exchanges such as New York, London, Tokyo and Hong Kong have been considered for the partial listing of the company, according to statements issues previously by Saudi officials.
The official bulleting also added that the rules of the international exchanges as well as those of the Saudi stock exchange would be complied with by Aramco’s IPO.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc