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Aramco may shun direct IPO marketing to US funds on legal risk: sources

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Saudi Aramco is considering a structure for its initial public offering that would prevent it from marketing the deal directly to fund managers in the US, people with knowledge of the matter said.

[LONDON] Saudi Aramco is considering a structure for its initial public offering that would prevent it from marketing the deal directly to fund managers in the US, people with knowledge of the matter said.

The state-owned oil giant wants to avoid litigation risks that could result from selling the deal to US-based institutions, according to the people, who asked not to be identified because the information is private. Aramco is consulting with its bankers on the pros and cons of different deal structures, and it hasn't made any final decision, the people said.

Many foreign IPOs rely on the "Rule 144A" structure, which allows overseas companies to market offerings to institutional investors in the U.S. The method being considered by Aramco is a so-called "Regulation S only" transaction, which would limit it to selling stock to foreign buyers and overseas units of US fund houses, the people said.

While that means that Aramco could still market the IPO to big investors like BlackRock Inc and Fidelity Investments via their foreign affiliates, US institutions without overseas subsidiaries would be left out. That would limit the pool of potential buyers for an offering that's slated to be one of the biggest equity offerings in history.

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Saudi Crown Prince Mohammed Bin Salman, the architect of the IPO plan, has previously said he expects Aramco to be valued at over US$2 trillion.

Aramco is planning to sell shares on the Saudi stock exchange as soon as November, Bloomberg News has reported. It has chosen the top banks for the deal and plans to hold a kick-off meeting with the underwriters as soon as this week, people with knowledge of the matter have said.

The company, formally known as Saudi Arabian Oil Co, didn't immediately respond to a request for comment.

 

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