Saudi Aramco is considering the sale of a stake to a Chinese investor as plans for its highly anticipated international public offering (IPO) are pushed beyond its target of next year, sources familiar with the matter said on Friday.
The IPO is expected to be the world’s largest stock sale and is a key component of the Saudi government’s economic reform program which aims to diversify the desert kingdom away from its reliance on oil exports.
A private placement of shares in the state oil company to a Chinese investor is being evaluated as a precursor to the international IPO, according to two sources who spoke on condition of anonymity as the information was not public.
They declined to name the investor, or how much of Aramco would be sold.
The move would provide Saudi Arabia with cash to help implement the National Transformation Program (NTP), as the reform package is formally known, one of the sources said.
The NTP comprises a number of difficult economic adjustments for Saudi Arabia — including removing some state subsidies and raising taxes — that are aimed at taming huge budget deficits caused by lower oil prices.
Concerns about the impact of the austerity measures on the economy are rising. While data earlier this month showed the deficit was shrinking, the Saudi economy entered recession in the second quarter, consumer prices are falling and unemployment among Saudis is at 12.8 percent.
“A range of options for the public listing of Saudi Aramco continue to be held under active review,” a Saudi Aramco spokesman said.
“No decision has been made and the IPO process remains on track,” the spokesman said.
Aramco’s dual listing on the Saudi stock market, Tadawul, and on an international exchange had been earmarked for next year by the Saudi authorities — with stock markets in New York, London and Asia all vying for the offering.
A decision on which exchange would secure the offering has still not been made, with top members of the Saudi royal family preferring New York and Aramco’s financial and legal advisers advocating London.
Both venues have political issues that have caused the Saudis unease and delayed the location decision, a third source familiar with the matter said.
The third source added that an international IPO beyond next year was still very much an option, while a Tadawul listing was on track for next year, pointing to comments from senior Saudi officials, such as those made in Moscow earlier this month.
The Financial Times reported that Aramco had held talks about a private stake sale to foreign governments — including China — and other investors amid growing concerns about the feasibility of an international listing.
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