Complex Made Simple

Look who’s stepping on the gas and floating $$billions

The IPO bull-run is beginning in the UAE not Saudi, although energy is the sector leading the push to raise cash.

This year, the IPO fever had no less than 6 major companies in the UAE planning to float shares and looking to shore up their finances potentially raising as much as $11bn between them .

These include Emaar’s Real Estate, Emirates Global Aluminium and GEMS Education.

One of them is Adnoc which is now on the hunt to raise $2bn from selling 20 per cent of its retail distribution arm, according to Forbes, and it’s the first time the oil company sells shares in one of its subsidiary companies, publically.

WATCH VIDEO: Abu Dhabi’s ADNOC beats Saudi’s ARAMCO to the IPO punch

IPO retail arm

The Adnoc IPO is going ahead with its November 13 announcement to float shares targeting ADNOC Distribution, and planning to list it on the Abu Dhabi Securities Exchange (ADX).

Adnoc Distribution reported a profit of 1.31 billion dirhams for the first nine months of this year, about the same as a year ago, according to the listing announcement. It secured a $2.25bn loan from a group of banks this month, according to a company statement.

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Reuters said the company will offer between 1.25 billion to 2 billion shares, in two tranches, which according to the listing announcement published by ADNOC Distribution, the IPO will be priced between AED 2.35 ($.64) to AED 2.95 ($.8) per share.

Bloomberg Markets estimates that based on that price range and a planned sale of 10 percent to 20 percent of the company, the distribution business is valued at $8bn to $10bn.

The final value of the IPO could be more in the range of $1bn to $1.5bn, said Bloomberg.

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Adnoc said 5% of the offered shares will be allocated to the first tranche and 95% to the second tranche, with subscriptions starting November 26, 2017 to December 7, 2017.

The final offer price will be announced on December 8, 2017 and ADX trading to begin on December 13, 2017.

ADNOC on wood

Reuters said the company has an approximate 67% market share by number of stations in the Emirates and currently operates 360 fuel stations in Abu Dhabi and Sharjah but also serves the emirates of Ajman, Fujairah, Ras Al Khaimah and Umm Al Quwain.

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ADNOC, at a holding company level, will always remain wholly owned by the Abu Dhabi Government.

ADNOC has a production capacity of around 3.15 million barrels per day, but according to Reuters, it is planning to expand to 3.5 million barrels per day by 2018.

“The petrol giant also produces 9.6 billion standard cubic feet of raw gas per day,” said Reuters.

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Recent IPO and bond activity in the UAE

Earlier in November, Emaar Properties PJSC raised $1.3 billion from the sale of in its development unit, while Mubadala Investment Co. expects to IPO its Emirates Global Aluminium unit next year, said Bloomberg Markets.

“This is the first real petroleum-linked issue that has come to the market. That’s huge, given that really this region is all about oil,” Salman Bajwa, chief executive officer of Emirates NBD Asset Management, said in a Bloomberg TV recently. “The appetite that we have seen among investors, among the retail investors as well as institutions, is huge.’’

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Raising $2 billion would make the Adnoc Distribution share sale the biggest in the U.A.E. since Dubai ports operator DP World Ltd. brought in $5 billion in 2007, according to data compiled by Bloomberg.

The company raised $3bn from bond sales in October.