FCA proposes revisions for Saudi Aramco float in London

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14 Jul, 2017

FCA proposes revisions for Saudi Aramco float in London

Investors have taken a negative view on plans unveiled by the FCA which would pave the way for Saudi Aramco to float in London with easier access to the stock exchange.

Analysts believe any listing by the oil giant would be the world’s biggest flotation, with the oil giant valued at around $2 trillion (£1.5 trillion), potentially leading to a big payday for any advisers on the deal.

Saudi Aramco is planning to sell only around 5pc of its shares, with London and New York the final two candidates. The company is the world’s largest oil producer and controlled by the Saudi royal family. It is eyeing a float in late 2018. The FCA has initiated a rule amendment that would allow state-owned companies, such as Aramco, to apply for a special category of premium listing with less heavy disclosure and regulatory requirements.

The City’s strict rules currently block premium listing unless a minimum 25% of the stock is sold. It is understood that firms using the proposed route would not have to disclose transactions with their sovereign owner, while shareholders would not be able to vote in or out independent board members.

The current amendments have raised eyebrows among institutional investors of watered down standards. Chief executive of the Investment Association, Chris Cummings, who represents 200 investors managing over £5.7trillion, said: “A premium listed segment without these investor protections is not a premium segment and will not provide the protections that investors expect.”

Similar reservations were expressed by Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, as well as investor rights group ShareAction, who warned of repeating past mistakes – such as when the London Stock Exchange was forced to tighten up its controls four years ago following governance failures at a foreign tycoon-owned Bumi and ENRC.

“As a financial centre, London must be careful not to damage its own reputation for high governance standards,” added Catherine Howarth, chief executive of ShareAction.

However, the London Stock Exchange welcomed the plans, saying “discretionary access” for investors was key to the capital’s success as a global financial centre. The FCA has launched a consultation on the proposals.

The chief executive of the FCA, Andrew Bailey, defended the plan, saying it would make markets “more accessible whilst ensuring that the protections afforded by our premium listing regime are focused and proportionate”.

The Suadi royal family is attempting to shift the country’s reliance on oil towards other industrial sectors under a plan called “Saudi Vision 2030”.

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