Adnoc Distribution IPO at Dh2.5 per share amid big interest in sale from retail investors

Pricing comes in the middle of Dh2.35 and Dh2.65 per share range

The retail tranche of Adnoc Distribution’s initial public offering was oversubscribed 22 times. Strong demand enabled the issuer to double the size of the retail tranche 10 per cent of the total offering size. Courtesy: Adnoc DistributionShow less

Adnoc Distribution’s 10 per cent initial public offering has been priced at Dh2.5 per share, coming in middle of the range of what was expected and valuing the company at Dh31.1 billion, according to its parent Adnoc.

Investors and analysts said the sale was well priced for a business that has room to grow both at home and abroad and individuals showed strong demand for the issue. Adnoc Distribution plans to open its first petrol stations in Dubai and Saudi Arabia next year. The company will be listed on the Abu Dhabi stock exchange.

“The price at Dh2.5 is attractive for retail investors who want to hold the stock and the company committed to paying a high percentage of its earnings as a dividend,” said an industry executive who did not want to be identified.

“The company has also guaranteed a minimum margin for the next five years, meaning that the business will not be negatively impacted by fluctuating oil prices.”

The energy company had earlier reduced the price range to Dh2.35 to Dh2.65 for the shares of Adnoc Distribution, according to terms seen by Bloomberg. The initial price range was Dh2.35 to Dh2.95 and the company had planned to sell as much as 20 per cent.

The offering is covered throughout the revised price range, according to the document. The subscription period for UAE investors closed on Wednesday and, for the institutional tranche, yesterday.

Adnoc Distribution currently operates 360 service stations and 235 Oasis convenience stores across the UAE except for Dubai and has a monopoly in Sharjah and Abu Dhabi. Enoc and Emarat are the only operators in Dubai.

Through a franchise model with an identified local partner – as yet unnamed – Adnoc Distribution also expects to begin operating in Saudi Arabia next year.

“We believe we enjoy widespread and favourable name recognition outside of our existing areas of operation, including in Dubai, Saudi Arabia and elsewhere in the [Arabian] Gulf region, which we believe will support expansion,” the company said in its prospectus.

IPO activity in the UAE is picking up after only two deals were completed throughout 2015 and 2016. Emaar Properties raised US$1.3 billion from the sale of shares in its development unit last month, while Mubadala Investment expects to IPO its Emirates Global Aluminium unit next year.

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The energy company had earlier reduced the price range to Dh2.35 to Dh2.65 for the shares of Adnoc Distribution, according to terms seen by Bloomberg. The initial price range was Dh2.35 to Dh2.95 and the company had planned to sell as much as 20 per cent. The offering is covered throughout the revised price range, according to the document. The subscription period for UAE investors closed on Wednesday and, for the institutional tranche on Thursday.

Adnoc Distribution currently operates 360 service stations and 235 Oasis convenience stores across the UAE except for Dubai and has a monopoly in Sharjah and Abu Dhabi. Enoc and Emarat are the only operators in Dubai.

Through a franchise model with an identified local partner – as yet unnamed – Adnoc Distribution also expects to begin operating in Saudi Arabia next year.

“We believe we enjoy widespread and favourable name recognition outside of our existing areas of operation, including in Dubai, Saudi Arabia and elsewhere in the [Arabian] Gulf region, which we believe will support expansion,” the company said.

IPO activity in the UAE is picking up after only two deals were completed throughout 2015 and 2016. Emaar Properties raised US$1.3bn from the sale of shares in its development unit last month, while Mubadala Investment expects to IPO its Emirates Global Aluminium unit next year.