Abu Dhabi's Adnoc Distribution is open to acquisitions as it pursues growth

UAE's biggest fuel and convenience retailer is looking to grow its business in markets such as India

Adnoc Distribution is open to acquisitions of fuel and convenience retailers or other assets that fit its business model, including in markets such as India, as it pursues growth, its deputy chief executive said.

“We want to widen our options to the customers,” John Carey told The National, when asked if he would consider acquiring assets to boost the company’s growth.

“When you look at the inorganic [growth] it’s about the investment return and the fit with our business,” he said yesterday, declining to say if Adnoc Distribution is engaged in acquisition discussions.

The company, a subsidiary of Abu Dhabi National Oil Company, received shareholders’ approval last week to increase its dividend for fiscal year 2019 to Dh2.39 billion, a 63 per cent increase on last year’s dividend of Dh1.47bn.

They approved raising the dividend for 2020 to Dh2.57bn, 75 per cent higher from 2018 and to pay a minimum of 75 per cent of distributable profit from 2021 onwards.

Also last Thursday, stakeholders allowed a programme that gives the company an option to buy-back up to 62.5 million shares, equivalent to 5 per cent of Adnoc Distribution’s publicly traded shares, during a 12-month period.

However, Mr Carey said a buy-back is not “imminent” or a policy which the company would want to implement in the short-term. Adnoc Distribution may use the buy-back scheme to open up stock options to employees or shareholders in the future if it is required, he said.

Adnoc Distribution, the UAE’s biggest fuel and convenience retailer, listed 10 per cent of its shares in 2017 on the Abu Dhabi Securities Exchange and its parent Adnoc retains the option of further selling its stake should it choose to do so, Mr Carey said, when asked if the company would consider increasing its free float on the market.

“At the time of the IPO, Adnoc said we are willing to sell up to 30 per cent of the company and that hasn’t changed,” he said. “If Adnoc decided to sell down, we wouldn’t have any shortage of takers.”

The Abu Dhabi company, which signed a preliminary agreement with a partner in India for the marketing and distribution of its lubricant products, may also look to acquire companies in Asia’s third-largest economy.

“It is a partnership that ultimately could lead to acquisition,” said Mr Carey.

“The partnership would look at other companies to acquire but we have much more to talk about [with the partner].”

The company, which is following a three-to-five-year strategic growth plan, is not inclined to follow some of its competitors that have separated their convenience retail from fuel businesses, branching out into stand-alone convenience stores.

Adnoc Distributon will pursue its existing business model for at least another couple of years, Mr Carey said, keeping fuel and convenience retailing on one site.

“I would say over the next two years our plan is to build on the business model that we have,” he said. “Beyond that, whether we would go into separate retailing business is something that we have yet to decide.”

Mr Carey said the trajectory of growth seen in 2018 is very encouraging and non-fuel and convenience areas of the business have “considerable headroom for growth”.