Abu Dhabi's Adnoc to Seek Up to $2 Billion With IPO of Unit

(Bloomberg) -- Abu Dhabi National Oil Co. is seeking to raise as much as $2 billion from the initial public offering of its fuel-retailing unit in an IPO that could be the biggest in the United Arab Emirates in 10 years.

The crude producer will price the shares of Abu Dhabi National Oil Co. for Distribution PJSC in a range of 2.35 dirhams (64 cents) to 2.95 dirhams, according to an advertisement published in Gulf News. Based on that price range and a planned sale of 10 percent to 20 percent of the company, the distribution business is valued at $8 billion to $10 billion.

IPO activity in the U.A.E. is showing signs of picking up after only two deals were completed throughout 2015 and 2016. Emaar Properties PJSC raised $1.3 billion from the sale of shares in its development unit earlier this month, while Mubadala Investment Co. expects to IPO its Emirates Global Aluminium unit next year.

“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 interview today. “The appetite that we have seen among investors, among the retail investors as well as institutions, is huge.’’

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.

Earnings, Loans

Adnoc, which pumps most of the crude in the U.A.E., plans to announce the final offer size and pricing on Dec. 8, with the stock expected to begin trading on Dec. 13 in Abu Dhabi. The final value of the IPO could be more in the range of $1 billion to $1.5 billion, according to a person with knowledge of the matter. The company said last week it plans to offer 1.25 billion to 2.5 billion shares.

The potential $8 billion to $10 billion valuation Adnoc Distribution could achieve is at the lower end of a range estimated earlier this year. The company could be worth between $10 billion and $14 billion, people familiar with the matter said in July. Adnoc didn’t comment at the time on that valuation.

The shares will be “very competitively priced,” John Carey, Adnoc Distribution’s deputy chief executive, said Sunday in a phone interview. “In terms of the pricing, we’ve done it to ensure a successful IPO and ensure that those people who invest have a successful after-market performance.’’

Convenience Stores

Adnoc Distribution operates 360 service stations throughout the country except in the emirate of Dubai. The company plans to expand next year into Dubai and neighboring Saudi Arabia, Carey said. In the U.A.E., it aims to boost sales of fuel and products sold at convenience stores located at most of its stations, Carey said.

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 $2.25 billion loan from a group of banks this month, according to the statement. The company doesn’t plan to borrow more, Carey said.

Share sales are poised to pick up across the Middle East as oil-rich Gulf governments sell assets to raise cash to diversify their economies after a slump in crude prices. The biggest of those is the planned IPO of Saudi Aramco, which is set for next year and could be the largest globally.

Earlier this month, Emaar Development PJSC struggled to complete its offering as a crackdown on corruption in Saudi Arabia hurt market sentiment and led investors to pull orders, people familiar with that deal said. 

Adnoc will try to sell stakes in some units and seek partners for others, CEO Sultan Al Jaber said in an interview this month. The company raised $3 billion from bond sales in October.

The IPO will be coordinated by Citigroup Inc., First Abu Dhabi Bank PJSC, HSBC Bank Plc and Merrill Lynch International. EFG-Hermes U.A.E. Ltd., Goldman Sachs Group Inc. and Morgan Stanley are acting as joint bookrunners for the offering. Rothschild & Co. is the sole financial adviser to Adnoc and Adnoc Distribution.

--With assistance from Arif Sharif Ros Krasny and Matthew Martin

To contact the reporters on this story: Dinesh Nair in London at dnair5@bloomberg.net, Anthony DiPaola in Dubai at adipaola@bloomberg.net, Ruth David in London at rdavid9@bloomberg.net.

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Bruce Stanley, Cindy Roberts

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