Adnoc L&S IPO: Company aims to list 15% stake on ADX

It will be the second initial public offering of an Adnoc business this year, following the listing of Adnoc Gas in March

Adnoc L&S, which provides logistics and maritime solutions, is undertaking a global expansion programme. Photo: Adnoc

Adnoc has announced plans to list 15 per cent of its logistics and shipping unit on the Abu Dhabi Securities Exchange, marking the second initial public offering of one of its businesses this year, following the listing of Adnoc Gas in March.

The state energy company will sell more than 1.1 billion shares in Adnoc Logistics & Services, it said on Wednesday.

The offer price, which will be in dirhams, “will be determined based on the offer price range”, and is set to be announced on the first day of the offer period, which begins on May 16.

The final offer price will be announced on May 25. The selling shareholder can amend the size of the offering at any time before pricing of the deal.

The subscription period for the retail tranche will close on May 23, while the second tranche for qualified investors is expected to close on May 24.

Shares in Adnoc Logistics are expected to begin trading on June 1.

Adnoc L&S intends to pay dividends twice each financial year.

It plans to pay a fixed dividend of $195 million for the second quarter and the second half of this year — equivalent to annualised dividends of $260 million relating to its performance in 2023.

Of that amount, $65 million for the second quarter is expected to be paid in the fourth quarter of the year while the remaining $130 million for the second half of 2023 will be distributed in the second quarter of 2024.

Thereafter, the company expects to “increase the 2023 annual dividend per share on a progressive basis by at least 5 per cent annual growth over the medium term, while regularly reviewing the policy in light of value-accretive growth opportunities”, it said.

“Adnoc L&S is a vital component of the UAE’s energy ecosystem, providing mission-critical logistics infrastructure and services for the production and global transfer of energy commodities to customers around the world,” said Capt Abdulkareem Al Masabi, chief executive of Adnoc L&S.

“Our planned IPO offers an exciting opportunity to accelerate our growth, supporting [the] Adnoc Group with its ambitious growth strategy, while further expanding the services provided to our customers and exploring new geographical areas and business verticals.”

Adnoc L&S, which provides logistics and maritime solutions, aims to have a growth capital expenditure of $4 billion to $5 billion in the medium term to expand the scope of services provided to companies in the Adnoc group.

The funds will also be used to invest in decarbonisation, expand the scope of services in the shipping business unit, grow international operations and develop new business lines.

The company could increase the growth capital target if the “right opportunities are available”, Mr Al Masabi told The National in an interview on Wednesday.

“We always send a message to all the investors that we have a very ambitious growth strategy [but, as of today], this is what we can announce,” he said.

“This is what's already planned but, definitely, if there are strategic opportunities that meet our strategic objectives … create value to our shareholders, we will … look at those opportunities beyond the $4 billion to $5 billion [target].”

The company will look to invest the target amount over a period of up to five years and will raise it through a combination of debt and equity.

“We have almost no leverage at all,” he said.

The company has set a target not exceeding 2.5 times in terms of average net-debt-to-earnings before interest, tax, depreciation and amortisation.

However, it is too early to decide if it will seek to raise funds from the loans or bonds market, he said.

Adnoc Group companies accounted for 72 per cent its total revenue for the year ended December 31.

More than 65 per cent of the total revenue of Adnoc L&S in 2022 was derived from long-term agreements, which are longer than one year, it said.

The company plans to further diversify its revenue base as it grows internationally, but the lion's share of its revenue will always be Adnoc, Mr Al Masabi said.

“We take it extremely positively actually, because it does give us that downside protection when it comes to the market fluctuation in terms of price volatility,” he said.

In March, it unveiled its global Integrated Logistics Services Platform and signed a $2.6 billion contract with Adnoc Offshore to provide logistics services.

The five-year agreement, with the option of a five-year extension, includes the provision of port services, warehouse operations, heavy lifting, material handling and shipping, rig and barge moves, marine terminal operations and waste management services.

“As the sixth company Adnoc is bringing to market, Adnoc L&S is ideally placed to drive performance, deliver value and capitalise on both Adnoc’s ambitious growth road map and the growing global demand for lower-carbon, reliable energy supplies,” said Khaled Al Zaabi, group chief financial officer of Adnoc.

“The planned offering … cements Adnoc’s role as a catalyst to further grow and diversify Abu Dhabi’s buoyant capital market.

“As a sustainability champion within the maritime and logistics sector, Adnoc L&S will play a crucial role in driving the decarbonisation of the UAE maritime sector, yet again offering investors a highly compelling investment proposition with exciting growth prospects.”

Abu Dhabi accounted for 14 per cent of all initial public offerings worldwide in the first quarter of 2023. Photo: ADX

Adnoc L&S also plans to expand its fleet to support growing the transport needs of its parent, as well as its global clientele.

In April, the company added five new-build very large gas carriers to its fleet, and plans to grow the size of its fleet to 50 by the end of this year, before adding another five vessels next year.

“With the delivery of all the vessels, we will be reaching close to 55 vessels and this will eventually increase to accommodate all the requirements of our clients,” Mr Al Masabi said.

The company, which has operations in Qatar and Saudi Arabia, the Arab world's largest economy, plans to further expand into the wider Mena region.

Adnoc L&S, which also has a shipping joint venture in China, is already considering some growth options in the Mena region and is committed to “continue to expand the global and regional footprint”, he said.

In March, Adnoc raised about Dh9.1 billion ($2.5 billion) from the sale of a 5 per cent stake in its gas business.

The company sold more than 3.8 billion shares, with the IPO drawing strong demand from institutional and retail investors, and generating more than $124 billion in orders.

It was about 50 times oversubscribed, the company said.

Abu Dhabi accounted for 14 per cent of all IPOs worldwide in the first quarter of 2023, an indication of the strength of its capital markets amid a challenging global IPO market, consultancy EY said in the latest edition of its Global IPO Trends report this month.

The UAE capital attracted $3 billion worth of IPO proceeds in the three months ended March, placing it third worldwide.