Adnoc to raise $1.64bn through share and bond offer in distribution business

The company will raise about $445m through a share issue and $1.195bn through exchangeable bonds

Adnoc floated 10% of its distribution offering in 2017, with additional shares listed in September last year. Courtesy Adnoc Distribution

Abu Dhabi National Oil Company is to raise $1.64 billion through the sale of shares in its fuel distribution arm, Adnoc Distribution, and the issue of a bond exchangeable for the company's shares.

It will offer shares equivalent to 3 per cent of Adnoc Distribution's share capital and a three-year, unsecured bond that could be exchanged for a further 7 per cent of shares, subject to certain conditions.

The company will offer around 375 million shares through an accelerated book build with an offer price of Dh4.36 per share to qualified institutional investors, which would bring in about Dh1.635 billion ($445m).

It also plans to raise $1.195bn through the exchangeable bond offering.

The transaction is the first combined equity and exchangeable bond offering in the GCC, according to the company. The deal also provides Adnoc with access to a new and broader investor base interested in an equity-linked bond investment, the company said.

"The pricing of the shares and the targeted amount to be raised indicates that there is strong demand for UAE assets," said Vijay Valecha, chief financial officer at Century Financial.

Adnoc Distribution "with a progressive dividend policy" fits the profile of companies that provide stable income to yield-chasing investors, he added.

Adnoc floated 10 per cent of its distribution offering in 2017 and listed additional shares in September last year.

The state-owned oil company will announce the final terms of its combined offering following the completion of the book building process.

The settlement of Adnoc Distribution's share offering is expected to be complete around May 31, 2021. The exchangeable bond offering is expected to be settled around June 4, 2021.

The national oil company has agreed to a lock-up period for 90 days from the settlement date for both the share and the exchangeable bond offerings, the statement said.

Adnoc has also submitted an application for the admission of the exchangeable bonds for listing and trading on the Vienna MTF, which is regulated by the Vienna Stock Exchange.

The additional share issuance comes amid a robust economic environment in the UAE. 
The Abu Dhabi market is the best performing in the Middle East in 2021. Its valuation has surged 30 per cent since the beginning of this year to reach a market capitalisation of just below $260bn.

Adnoc Distribution’s shares closed down 1.02 per cent at Dh4.90 per share, but have gained 29.3 per cent since the start of the year. It will join the Morgan Stanley Capital International (MSCI) Emerging Markets index on May 27 – a move that will increase the attractiveness of its shares to potential international investors and help to further diversify the company’s investor base.

It will join nine other UAE-listed companies that are part of the index, which is tracked by funds with billions of dollars worth of assets.

Adnoc Distribution reported a 58 per cent rise in first-quarter profit this year, helped by growth in its fuel retail and commercial segments.

Profit for the first three months of the year reached Dh631m ($171.8m) from Dh400m for the same period last year.

The fuel retailer has also expanded beyond its home market of the UAE in recent years. The company plans to "accelerate delivery momentum" and open a total of 70 to 80 new stations across the UAE and Saudi Arabia by year-end, it said earlier this month.

Adnoc Distribution plans to open another 30 to 45 units in the UAE. In Saudi Arabia, the company is building on earlier agreements to acquire fuel stations that will expand its portfolio in the country to 37 units. Adnoc Distribution had a total of 449 stations at the end of March.

On Friday, the company appointed Bader Al Lamki as its new chief executive, replacing Ahmed Al Shamsi. Mr Al Lamki, who until recently was chief executive of district cooling company Tabreed, will take up his role tomorrow.