Saudi Aramco consolidates operations in prelude to IPO

06 June 2018

Saudi Aramco has created a subsidiary to house its multibillion-dollar pension fund and could privatise its aviation division, according to a media report.

The move is seen as Aramco restructuring some of its non-oil and gas assets ahead of its planned initial public offering (IPO), Reuters reports.

The aim is to consolidate Aramco’s operations, which could make it easier to value since its business risk would be clearer, helping it achieve a higher price for its shares, according to the report.

The Aramco listing, which now appears to be postponed until 2019, is the centrepiece of the government’s ambitious Vision 2030 plan to diversify the kingdom’s economy beyond oil.

Crown Prince Mohammed bin Salman expects the IPO to value Aramco at a minimum of $2 trillion, meaning a sale of 5 per cent could raise $100bn to help fund Vision 2030 projects.

Analysts have valued Aramco at between $1 trillion and $1.5 trillion.

Saudi Arabia has often tasked Aramco with carrying out government projects that have social goals and are too big or daunting for the private sector, such as building industrial cities, stadiums and cultural centres.

Aramco has its own schools, housing, airline fleet and hospitals, which are used by its 55,000 or so employees and their families. But potential investors may not want to expose themselves to such a complicated array of assets, which would not be as profitable as Aramco’s core oil business, financial sources said.

About six months ago Aramco created a subsidiary for its in-house multibillion-dollar retirement fund management unit, now called ‘Wisayah’, Reuters reports.

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