First IPO from an Adnoc Group company still subject to regulatory approvals
Adnoc Distribution shares to list next month on ADX
The Abu Dhabi National Oil Company plans to list a minority stake in its service stations operator on the Abu Dhabi stock market next month.
At least 10 per cent of Adnoc Distribution, which operates 360 service stations and 235 Oasis convenience stores throughout the UAE, will be sold to investors in the UAE and internationally.
The listing is still pending final approval as well as the approvals of regulators the Securities and Commodities Authority and the Abu Dhabi Securities Exchange (ADX). Ultimately, the transaction would also be dependent on market conditions but it is understood that shares could start trading by mid-December. The offer period will open on November 26, according to local market sources, giving plenty of time for investors who had been seeking an allocation in the Emaar Development listing on the DFM this month, to free up capital for the Adnoc Distribution IPO.
Adnoc will take all the proceeds from the IPO – the first in the group’s history - and remain the majority shareholder. Institutional investors will include the strategic federal investor the Emirates Investment Authority, which will have a 5 per cent overall allocation reserved for it, and there will also be a tranche set aside for domestic retail investors. Pricing will be via a bookbuilding process.
As reported in The National in July, Adnoc’s new corporate strategy includes the consideration of the public flotation of shares in select service business units as part of a broader plan to more actively manage its portfolio of assets and form new partnerships. That is expected to unlock value, create and grow revenue streams, and foster entrepreneurship within the organisation as well as in the broader economy.
Dr Sultan Al Jaber, Adnoc's chief executive, described the IPO as “an important milestone” in the group’s new approach and a “unique opportunity for investors to take advantage of the UAE’s attractive and dynamic investment environment”.
Adnoc Distribution chief executive Saeed Al Rashdi said that the company plans to become “one of the region’s leading consumer retailers and fuel wholesalers”.
Adnoc Distribution’s business model has been boosted by the reform of fuel subsidies in 2015 that allow for stable margins. It has a 67 per cent overall market share and a monopoly in Abu Dhabi and Sharjah. It also has a strong commercial and industrial fuel distribution business including in aviation, government and other strategic sectors. The “revitalisation” of its retail network is seen as an important growth area for the future, according to Mr Al Rashdi. Its 235 stores makes its retail network the largest in the country and the company is seeking a valuation based on what a similar-sized retail group might achieve rather than that for an equivalent scale oil & gas distribution business which would be lower according to European multiples, local market sources said.
The company, which had earnings before interest, tax, depreciation and amortization of Dh2.1 billion last year, will follow a "consistent and progressive dividend policy", with shareholders set to receive at least US$400 million in the 2018 calendar year.
Management has also been beefed up ahead of the IPO with deputy chief executive John Carey joining from BP and Enoc’s Petri Pentti becoming chief financial officer.
Selling shares to the public is also aimed at nurturing Abu Dhabi’s capital markets. Abu Dhabi so far has taken only small steps toward fostering a retail share-owning culture, and selling shares in the ubiquitous Adnoc service stations is seen as a potential way to generate the kind of enthusiasm seen in, for example, the UK privatisations of the 1980s of businesses like British Telecom that were copied throughout the world.
Rothschild is the financial advisor on the IPO with Merrill Lynch, Citigroup, First Abu Dhabi Bank and HSBC as joint global coordinators. EFG Hermes, Goldman Sachs and Morgan Stanley are joint bookrunners.
Adnoc's US$3 billion international bond - issued by subsidiary Abu Dhabi Crude Oil Pipeline – was the first from the group and one of the Middle East's largest ever non-sovereign bond offerings. It was more than three times oversubscribed, the company said earlier this month.