Khalid al-Falih had opposed Saudi Crown Prince
Mohammed bin Salman
The powerful energy minister had repeatedly stalled Saudi Aramco’s massive share sale. At a July gathering, he again urged the prince and his advisers to wait before launching what could be the world’s biggest initial public offering.
It wasn’t the right time, he said. Oil prices were too low. Demand for crude was slumping. Ordinary Saudis wouldn’t accept foreigners owning a piece of their national oil company.
Mr. Falih’s naysaying prompted the prince to call him “the cynical man” and compare him to a slow-moving oil tanker.
When Mr. Falih left the meeting room, advisers told the crown prince that he had to go, according to people with knowledge of the meeting.
Mr. Falih headed Saudi Arabia’s delegation to the Organization of the Petroleum Exporting Countries, effectively leading the cartel and enjoying perks such as private jets. After the meeting, Mr. Falih told friends he worried his job was in danger.
“He was starting to realize that his overcautious approach and his warnings about the IPO, oil prices, etc. had backfired, and he was not seen anymore as MBS’s man,” said one of the former minister’s associates, referring to the crown prince by his nickname.
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By September, the crown prince had stripped Mr. Falih of his various roles, including chairman of Aramco. Prince Mohammed installed his half-brother,
Prince Abdulaziz bin Salman,
as energy minister and appointed the governor of the Saudi sovereign-wealth fund and a confidant, Yasir al-Rumayyan, to chair Aramco and shepherd a share sale.
The Aramco IPO is the culmination of the crown prince’s yearslong effort to sell a sliver of the world’s most-profitable company. The billions of dollars raised from a successful share sale would fund the economic reform program he has promised the Saudi people, aimed at diversifying the kingdom away from oil and creating jobs for the growing youth population.
“He’s made a huge bet on it,” Jim Krane, an expert on Saudi energy and a fellow at Rice University’s Baker Institute, said of the crown prince.
Interviews with a dozen Saudi advisers, bankers and people familiar with the IPO plans illustrate how Prince Mohammed has driven Aramco’s listing by scything through Saudi Arabia’s bureaucracy to silence or remove those opposed to the listing. He has prodded Aramco back to full production following an attack on its facilities and tried to rehabilitate his own image after the murder of Jamal Khashoggi.
Still, in recent weeks, the prince has had to scale back his ambitions for the IPO. Aramco and its advisers have struggled to draw international investors. The company on Sunday said it would offer a share sale at a valuation of $1.6 trillion to $1.7 trillion, well short of the prince’s initial goal of $2 trillion.
Aramco had talked about listing up to 5% on a global exchange but will now only sell 1.5% of the company to local and international investors registered in Saudi Arabia.
At the top of Aramco’s valuation, the firm will raise a little over $25.6 billion. That would just edge the $25 billion that
raised in 2014, currently the biggest-ever share sale.
The much-reduced ambition and domestic listing on Saudi’s Tadawul exchange has frustrated investors and bankers who say Aramco is now only selling at that size to try to break a record. Bankers working on the deal recommended pricing Aramco’s valuation far lower to attract international buyers, but Prince Mohammed balked at going lower than $1.6 trillion.
“They are fudging the deal size,” said a London-based institutional investor. “It feels like a waste of time now. Frustrating.”
The Saudi government didn’t respond to requests for comment on Aramco’s IPO. Aramco declined to comment.
A representative for Mr. Falih didn’t respond to requests for comment.
Prince Mohammed first announced an intention to list Aramco in an interview in 2016. Bankers appointed to the IPO struggled to reach the prince’s $2 trillion valuation. Company executives worried about legal challenges of listing on a global exchange. The IPO met passive resistance among many Aramco and Saudi government employees, The Wall Street Journal has reported. Eventually, the prince last year delayed a sale until at least 2020.
In June, Saudi officials and Aramco executives began meeting with investment banks to discuss listing 5% of the company. On Sept. 12, bankers from nine lenders Aramco appointed as joint financial advisers flew into Dubai for a meeting at the Ritz Carlton hotel with Mr. Rumayyan, Prince Mohammed’s lieutenant and Aramco’s newly appointed chairman.
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The banks on the deal included
Goldman Sachs Group Inc.,
and two domestic investment banks.
Two days after the briefing in Dubai, drone and missile attacks on two Aramco oil facilities briefly knocked out half of Saudi Arabia’s oil production and sent crude prices soaring. Saudi Arabia blamed Iran for the attack—a charge Tehran denied.