Adnoc Distribution to buy 15 service stations in Saudi Arabia for $10m

Adnoc Distribution, the UAE’s largest fuel and convenience retailer, agreed a deal to acquire 15 fuel service stations in Saudi Arabia.

The company will spend $10 million on the stations as part of its first phase of expansion plans in the Arab world's largest economy, it said in a statement to the Abu Dhabi Securities Exchange on Thursday.

“Expanding our presence in Saudi Arabia is an important milestone for our company and part of our profitable growth strategy,” Ahmed Al Shamsi, acting chief executive of Adnoc Distribution, said. “We see this expansion as a natural progression since opening our first station in 2018 and look forward to significantly increasing our presence in the coming years.”

The company currently owns two stations in the kingdom – one on the Riyadh-Dammam highway and another in the city of Hofuf within the Al Ahsa Governorate.

The company is also “in discussions on a range of opportunities” to grow its footprint in the kingdom, he said.

“Saudi Arabia is the largest market in the GCC and there is huge potential for experienced fuel operators like us to consolidate the market and capture further growth,” Mr Al Shamsi added.

The new stations are based in the eastern region of the country and offer both fuel and retail services to customers, according to the company.

In the UAE, the company has been expanding its network and currently operates more than 420 service stations in all seven emirates. It opened its 20th station in Dubai last month, where it has more than tripled its footprint in the emirate, from just six stations at the start of the year.

It is also aiming to expand into Egypt, the Arab world’s most populous country.

Saudi Arabia is aiming to attract foreign direct investment to diversify its economy as part of its Vision 2030 programme. Earlier this month, the kingdom's Ministry of Investment reported a 21 per cent year-on-year jump in foreign investor licences in the third quarter as the country reopens its economy following Covid-19 restrictions. It issued 306 new investor licences during the period with India, Egypt and the UK being the top sources of new foreign projects.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Adnoc Distribution to buy 15 service stations in Saudi Arabia for $10m

The company aims to “significantly” increase its presence in kingdom and become a top fuel retailer by 2025

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