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Saudi Kayan IPO could damage market
Saudi Kayan Petrochemical Co. secured approval from the Saudi stock market regulator on Wednesday to sell $1.8 billion of shares this month in what will be the second-largest Gulf Arab initial public offering.
Saudi Kayan, which is 35% owned by state-controlled Saudi Basic Industries Corp. (SABIC), has approval to offer 675 million shares at 10 riyals each ($2.67) between April 28 and May 7, the Capital Markets Authority said in a statement on the Saudi bourse website.
The IPO, equivalent to 45% of the company's share capital, is only open to Saudi Arabia's 17.5 million nationals.
"In its current state, the market does not need an IPO, especially of this size," said Abdulhamid al-Amri, a member of the Saudi Economic Association, an independent economic research body.
Saudi Arabia's stock market plunged 52.5% last year, making it the worst performer among 81 measured by U.S. stock market research company Birinyi Associates.
The benchmark of the world's largest oil exporter, which doubled in 2004 and 2005 as soaring oil prices spurred economic growth, has fallen another 1.32% this year to Tuesday.
The market "will not be able to absorb the repercussions of an IPO of this size," Amri said.
The minimum subscription is for 50 shares and the maximum 20 million shares, the CMA said. The IPO was initially slated for last year.
"I'm 100 per cent sure the IPO will be fully subscribed, given the quality of the investment Kayan is involved in and the price of its shares," Kayan Chairman Mutlaq al-Morished told Reuters by telephone.
Morished is also chief financial officer of SABIC, the world's largest chemical company by market value.
SABIC is helping set up the $10 billion Saudi Kayan project with Kayan Petrochemical Co. to produce base chemicals, mainly for export to Asian nations such as China and India where growing economies are spurring demand.
The complex, which will produce ethylene, propylene and other chemicals, will be complete in 2009.
The biggest Gulf Arab IPO was in 2003 when the Saudi government sold a stake in Saudi Telecom Co. for $2.72 billion.
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