The offering comes after $3bn bond sale earlier in the month
Adnoc kicks off regional IPO activity among oil majors with unit offering up to 20% stake
Abu Dhabi National Oil Company (Adnoc) will sell as much as 20 per cent of its fuel retail and distribution unit to local and international investors in an initial public offering (IPO) that will list the entity on the Abu Dhabi Securities Exchange (ADX) next month, kicking off a wave of IPOs among oil majors in the region.
Adnoc Distribution will list 1.25 billion to 2.55 billion shares - representing 10 to 20 per cent of the company - in an offering of two tranches that will commence on 26 November and end 6 and 7 December respectively. The first tranche of 5 per cent of the offering is open to local retail investors and the second, accounting for the remaining 95 per cent, is open to government and international institutions and investors and high net worth individuals.
The final offer price will be determined by a book-building process but a range will be announced when the offer opens. The nominal value of the shares will be 8 fils rather than the typical Dh1. The shares are expected to begin trading on the ADX on December 13.
The official announcement of the listing comes a few days after Dubai real estate developer Emaar Properties’s development unit issued an IPO to raise up to $1.3bn (Dhs4.82bn) on the Dubai Financial Market (DFM) - the largest such offering in three years.
Adnoc entity’s public listing, the first for the group, comes after another unit, its pipeline operator, issued a US$3 billion bond and one of the largest non-sovereign offerings in the region, as it looks to tap equity and bond markets while actively managing its portfolio of assets. The debt issuance was three times oversubscribed, the company said earlier this month.
Adnoc has made reservations for institutional investors such as strategic federal investor, Emirates Investment Authority, which has an overall five per cent allocation, with another tranche set aside for domestic retail investors.
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 offering - 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.
Its 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.
"Though the fuel distribution segment is entirely based in the domestic market, investors would likely be interested in a stable, highly-rated economy and solid currency, but it mostly depends on the IPO valuation. With a stable dividend policy and consistent growth in earnings can prove very attractive specially for long term institutional investors,” said Tariq Qaqish, managing director at financial services firm Menacorp.
The company had earnings before interest, tax, depreciation and amortisation of Dh2.1 billion last year with shareholders set to receive at least US$400 million in the 2018 calendar year.
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.
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.
Adnoc’s move forms part of its strategic transformation announced in July, which looks to more actively manage assets under its portfolio and form new partnerships.