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The biggest stock market listing on the Abu Dhabi Securities Exchange in a decade is set to take place on Wednesday as shares in the fuel distribution arm of the Abu Dhabi National Oil Company (ADNOC) are listed. (Read more here).
In total, 1.25 billion (10 percent) of shares in Abu Dhabi National Oil Company for Distribution (ADNOC Distribution) are being sold to investors at a price of 2.50 UAE dirhams per share, which has allowed the company to raise 3.125 billion dirhams ($851 million). (Read more here).
The deal, which was oversubscribed by 22 times, gives the company a market capitalisation of around $8.5 billion.
In a press statement announcing the offer price last Friday (December 8), ADNOC Distribution's chief executive officer, Sultan Al Jaber, said: "ADNOC Distribution’s strong business model, unique market position and attractive growth prospects has garnered healthy and solid demand for the IPO, which has set a new benchmark for the UAE equity capital markets."
In early trading on the Abu Dhabi Securities Exchange, ADNOC Distribution's shares rose by 11 percent to 2.77 dirhams.
Notes to the prospectus state that the company is planning to grow both by geographic expansion - it has a monopoly in Abu Dhabi and Sharjah, but is planning moves into the Dubai market and a franchise deal in Saudi Arabia - and by increasing revenues.
The company, which is planning to introduce a premium refuelling service to its 360 filling stations, charging between 5-10 dirhams to customers for having an attendant refill their vehicles. It estimates that 40-50 percent of customers will pay for the privilege, which it said could bring in an extra 80 million-200 million dirhams per year. (Read more here).
However, the prospectus also states that the company has taken on considerably more debt.
A note in the document that ADNOC Distribution paid out a special dividend of 8.4 billion dirhams to its parent company, ADNOC, last month, as well as repaying a 6.3 billion dirham capital contribution that had been provided by ADNOC. It also settled a 2.45 billion dirham fuel bill.
ADNOC Distribution took out a new, five-year term loan of $1.5 billion to pay these balances, and also arranged a $750 million credit facility with a consortium of banks including Abu Dhabi Commercial Bank, Bank of America Merrill Lynch, Citibank, First Abu Dhabi Bank and HSBC Bank Middle East.
An analysts' note published by Bahrain-based Securities & Investment Company last month cast doubt on ADNOC’s ability to break into the Dubai market.
"It should be noted that in 2015, ADNOC reached an agreement to acquire 59 Emarat service stations in Dubai and began supplying fuels to these service stations from 1 January 2015. However, in 2016 this acquisition was abandoned," the note said.
Moreover, an analyst who spoke to Zawya on condition of anonymity said that the 40-50 percent take-up of the premium refuelling charge that the company is forecasting may not be obtainable, especially on the daily Sharjah-Dubai commute.
"When you start charging in Sharjah or Abu Dhabi 5 or 10 dirhams for every refuelling... when I have an option for refuelling in Dubai I will do that," the analyst said. "So they will lose a lot of volumes the day they implement this."
Read Zawya's Special Coverage on the Adnoc Distribution IPO here:
Further reading:
In total, 1.25 billion (10 percent) of shares in Abu Dhabi National Oil Company for Distribution (ADNOC Distribution) are being sold to investors at a price of 2.50 UAE dirhams per share, which has allowed the company to raise 3.125 billion dirhams ($851 million). (Read more here).
The deal, which was oversubscribed by 22 times, gives the company a market capitalisation of around $8.5 billion.
In a press statement announcing the offer price last Friday (December 8), ADNOC Distribution's chief executive officer, Sultan Al Jaber, said: "ADNOC Distribution’s strong business model, unique market position and attractive growth prospects has garnered healthy and solid demand for the IPO, which has set a new benchmark for the UAE equity capital markets."
In early trading on the Abu Dhabi Securities Exchange, ADNOC Distribution's shares rose by 11 percent to 2.77 dirhams.
Notes to the prospectus state that the company is planning to grow both by geographic expansion - it has a monopoly in Abu Dhabi and Sharjah, but is planning moves into the Dubai market and a franchise deal in Saudi Arabia - and by increasing revenues.
The company, which is planning to introduce a premium refuelling service to its 360 filling stations, charging between 5-10 dirhams to customers for having an attendant refill their vehicles. It estimates that 40-50 percent of customers will pay for the privilege, which it said could bring in an extra 80 million-200 million dirhams per year. (Read more here).
However, the prospectus also states that the company has taken on considerably more debt.
A note in the document that ADNOC Distribution paid out a special dividend of 8.4 billion dirhams to its parent company, ADNOC, last month, as well as repaying a 6.3 billion dirham capital contribution that had been provided by ADNOC. It also settled a 2.45 billion dirham fuel bill.
ADNOC Distribution took out a new, five-year term loan of $1.5 billion to pay these balances, and also arranged a $750 million credit facility with a consortium of banks including Abu Dhabi Commercial Bank, Bank of America Merrill Lynch, Citibank, First Abu Dhabi Bank and HSBC Bank Middle East.
An analysts' note published by Bahrain-based Securities & Investment Company last month cast doubt on ADNOC’s ability to break into the Dubai market.
"It should be noted that in 2015, ADNOC reached an agreement to acquire 59 Emarat service stations in Dubai and began supplying fuels to these service stations from 1 January 2015. However, in 2016 this acquisition was abandoned," the note said.
Moreover, an analyst who spoke to Zawya on condition of anonymity said that the 40-50 percent take-up of the premium refuelling charge that the company is forecasting may not be obtainable, especially on the daily Sharjah-Dubai commute.
"When you start charging in Sharjah or Abu Dhabi 5 or 10 dirhams for every refuelling... when I have an option for refuelling in Dubai I will do that," the analyst said. "So they will lose a lot of volumes the day they implement this."
Read Zawya's Special Coverage on the Adnoc Distribution IPO here:
Further reading:
- Abu Dhabi's ADNOC Distribution shares open sharply up after first IPO in six years
- ADNOC Distribution IPO attracts strong investor response
- Abu Dhabi's ADNOC Distribution fuel firm IPO raises $851mln
- Adnoc Distribution's UAE IPO to price in middle of indicated range-bookrunners
- ADNOC to tap into undeveloped gas reservoirs to meet demand
(Reporting by Michael Fahy; Editing by Anoop Menon and Yasmine Saleh).
(michael.fahy@thomsonreuters.com)
© ZAWYA 2017
