20/11/2017 13:48 AST
Abu Dhabi National Oil Co. will sell as much as a fifth of its fuel-distribution unit in an initial public offering just weeks after a wave of arrests in neighboring Saudi Arabia almost derailed the Middle East’s largest share sale.
The state-owned crude producer will offer 1.25 billion to 2.5 billion shares of service-station business Abu Dhabi National Oil Co. for Distribution PJSC, according to an advertisement published in the daily Gulf News on Monday. Shares are set to begin trading on the Abu Dhabi Securities Exchange by Dec. 13, and the price range will be announced on Nov. 26.
In a sign that Adnoc could face unforeseen investor skepticism in the Distribution share sale, Dubai property developer Emaar Properties PJSC pulled off the Middle East’s largest initial share offering this year, after risking failure amid uncertainty in the wake of the Saudi arrests. The crackdown, which Saudi state media said Prince Mohammed ordered to root out corruption, led to the arrest of princes, current and former ministers and the kingdom’s richest men, shocking the region.
Companies in the United Arab Emirates are coming to market before Saudi Arabia sells shares in its state oil producer in what would be the world’s largest IPO, pegged as a potential $100 billion offering and planned for the second half of next year. The sale is the cornerstone of Crown Prince Mohammed bin Salman’s plan to transform the economy and society in the traditionally conservative monarchy.
Diversifying Economies
Emaar’s advisers labored to complete a $1.3 billion offering of its development business after local investors reneged on hundreds of millions of dollars in demand on the last day of the sale, a retreat triggered by the Saudi crackdown, according to people familiar with the matter. Emaar Development sold about 800 million shares within its price range, according to data released by the Dubai bourse. Global funds accounted for about 40 percent of the sale.
With crude prices at about half of their 2014 average, international companies and state energy producers alike are trimming costs, while oil-rich Gulf governments are also selling assets to raise cash in an effort to diversify their economies.
Adnoc will try to sell stakes in some units and seek partners for others, Chief Executive Officer Sultan Al Jaber said in an interview last week, when the company announced the IPO. Adnoc, which raised $3 billion in bonds last month, is putting chunks of separate operating units up for sale instead of selling a piece of the parent company, as the Saudis are planning to do.
"We are looking for ways to maximize value to our shareholders while keeping Adnoc wholly owned by the Abu Dhabi government," Al Jaber said. Adnoc could seek a cornerstone investor for the unit’s IPO, he said.
High Valuation
The company may seek a valuation of $10 billion to $14 billion for its distribution unit, people familiar with the matter said in July. Adnoc posted earnings before interest, tax, depreciation and amortization of 2.1 billion dirhams ($573 million) last year, according to the business, suggesting a price-to-earnings ratio of up to 25 times.
That would be a high ratio by global standards, though the lack of similar listed companies in the region and Adnoc’s position as a state-owned monopoly make valuation difficult. Based on rule-of-thumb metrics of Ebitda-to-valuation for comparable companies, a value closer to $5 billion to $8 billion might be more appropriate.
Adnoc pumps most of the crude in the U.A.E., a member of the Organization of Petroleum Exporting Countries with about 6 percent of global reserves. The company allows foreign companies to join in partnerships that give them a stake in the emirate’s oil.
In contrast, Saudi Aramco, as the kingdom’s state company is known, holds the exclusive right to develop all the crude in the world’s largest exporter.
Bloomberg
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