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Abu Dhabi, UAETuesday 11 December 2018

Adnoc Distribution sets pricing for IPO on Abu Dhabi bourse

The proposed price range equates to approximately $8 to $10 billion in equity value

Subscription to Adnoc Distribution's IPO will begin in late November. Courtesy Adnoc
Subscription to Adnoc Distribution's IPO will begin in late November. Courtesy Adnoc

Adnoc Distribution, which intends to list on the Abu Dhabi stock market next month, has opened the subscription of its initial public offering (IPO), setting the pricing between Dh2.35 and Dh2.95 per share.

At this price range and on a 12.5 billion share count, this equates to approximately $8 to $10 billion in equity value, Adnoc Group chief executive Sultan Al Jaber said in a statement.

“The planned IPO of Adnoc Distribution is centered around Adnoc’s recently announced strategy to more actively manage our assets and capital and represents a key milestone in the company’s ongoing transformation,” Mr Al Jaber said. “It will also support the continued evolution of Adnoc Distribution and accelerate growth of the business. Adnoc Distribution has enormous potential and we believe this IPO will help unlock the inherent value in the business. We see multiple areas for growth in the business – new initiatives in fuel retail sales, further expansion and leveraging of our market leading convenience store platform, as well as growing our commercial fuel distribution business and increasing our regional footprint.”

The company, which runs services stations and retail outlets, will list 1.25 billion to 2.5 billion shares - representing 10 to 20 per cent of the total shares of the company - in an offering of two tranches that will open for subscription on 26 November and close on 6 and 7 December, respectively. The first tranche of 5 per cent of the offering is open to local retail investors, while the rest will be offered to government, international institutional investors and high net worth individuals.

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The minimum investment in shares for the retail offer has been set at Dh10,000, with any additional investments to be made in increments of at least Dh1,000. No maximum investment in the offering has been set, according to the statement.

The final pricing announcement will be made on December 8 following a global book-building process with institutional investors. The shares are expected to begin trading on the ADX on December 13.

It is understood that by maximising the proximity of Adnoc’s service stations to most neighbourhoods, the company could turn its convenience stores into the grocery top-up destination of choice. In 2016, the company recorded revenues of Dh17.7 billion and a net profit of Dh1.8 billion, it said in the statement.

Adnoc Distribution also plans to introduce digital services including booking and paying via smartphone app for fuel to be delivered direct to a customer’s vehicle while at home or at work. The creation of a loyalty programme and offering deliveries of LPG cylinders to retail customers will also incrementally boost sales and improve the customer experience.

The IPO offering, meanwhile comes ahead of Saudi Aramco’s planned listing next year, which may raise as much as $100bn as part of a broader diversification strategy by the kingdom that seeks to reduce the country's dependence on oil revenues.

The share float - the world’s largest should it go ahead - has whetted appetite among global fund managers and has brought institutional investor attention to planned IPOs from national oil companies in the region.

Adnoc Distribution currently operates 360 service stations and 235 Oasis-branded convenience stores throughout the UAE. Adnoc’s decision to part privatise the company forms part of its strategic transformation announced in July, which looks to more actively manage assets under its portfolio and form new partnerships.

“This watershed IPO also represents a new chapter in the diversification, growth and development of the UAE’s capital markets, and specifically the Abu Dhabi Securities Exchange,” Mr Al Jaber said. Following the IPO, Adnoc will remain a significant, long term and committed majority shareholder.

Ahead of the planned listing, Adnoc Distribution beefed up its management, bringing in BP’s John Carey as deputy chief executive and Petri Pentti from Dubai-based Emirates National Oil Company - which also operates fuel stations - as chief financial officer.

“We will continue to consider the potential minority listings of some of our services businesses where a listing might be appropriate, as well as, of course, other options,” Mr Al Jaber said. “Our key, overriding objectives are unlocking and maximizing value and performance across the Adnoc Group.”

Rothschild is the financial advisor on the IPO along with Merrill Lynch, Citigroup, First Abu Dhabi Bank and HSBC as joint global coordinators. EFG Hermes, Goldman Sachs and Morgan Stanley are joint bookrunners.