Shareholders of RAK Petroleum are set for a long-awaited “liquidity event” after the company said yesterday it would proceed with an IPO, with shares expected to begin trading in Norway next month.
RAK Petroleum said it planned to raise 20 million Norwegian krone (Dh11.1m) in a public listing on the Oslo Bors, the same exchange as the producer DNO, in which it holds a 42.8 per cent stake.
Shares are being offered at between 12.48 and 15.25 krone, but to entice retail investors the final price will be determined based "on the market value of RAK Petroleum's holding of shares in DNO less a 35 per cent discount", the company said. At least 25 per cent of the firm is being listed.
Some investors have held their RAK Petroleum shares in the OTC market for almost 10 years after subscribing for the company’s stock in 2005. A regulatory move passed shortly after the capital was raised prevented it from publicly listing, resulting in the transaction becoming a fully funded private equity deal, rather than a straightforward equity share-sale.
This followed a flurry of greenfield IPOs, the process of raising cash for a company that is yet to be formed and then lists, during the equity boom just five years after the inception of stock markets in the UAE in 2000.
RAK Petroleum was set to be the latest greenfield, and its planned IPO came only a few months after the successful public share sale of Sharjah-based Dana Gas, which in 2005 planned to take on upstream oil and gas operations in the region including a deal with Iran.
However, the deal with Iran’s state energy enterprise never materialised after the surprise win by Mahmoud Ahmedinejad in presidential elections altered Iran’s stance on energy and other issues. Dana Gas and NIOC have been in arbitration ever since.
In the aftermath, the Securities and Commodities Authority imposed a ban on greenfield IPOs.
“It was a shame that the regulation came just after the money was raised,” said Ali Shihabi, the former chairman of the Dubai-based investment bank Rasmala, which had been mandated to manage the RAK Petroleum IPO. Mr Shihabi also served as a founding member on RAK Petroleum’s board until just over a year ago.
“It wasn’t targeted at RAK Petroleum, but unfortunately the company took a hit and the shareholders – who counted in the few hundred – weren’t exactly thrilled. Everyone was expecting an IPO, the money was raised on that basis.”
This year the regulator reversed its decision with the entry of Marka on the Dubai Financial Market in September.
“I think they changed their regulation because the market was dry and they needed to increase the depth and types of companies that came in, which were typical small insurance types,” said Mohammed Ali Yasin, the managing director at NBAD’s brokerage arm. “They developed a looser policy regarding some of the greenfields if they’ve demonstrated a strong business plan and target acquisitions that will take place as soon as the company is established.”
Having already raised the capital but being unable to continue with the IPO as planned, RAK Petroleum was faced with a challenge regarding strategy. It subsequently embarked on an acquisition spree accumulating non-core assets including investments in property and aviation.
With the arrival of the oil industry veteran Bijan Mossavar-Rahmani as the chief executive in 2008 the company refocused on energy and built up a stake in Norway’s DNO, which held lucrative assets in northern Iraq.
The former US ambassador to Iraq, Zalmay Khalilzad, was also brought in as board member to shore up its political clout and help to close a deal with the Kurdish government in northern Iraq on behalf of DNO.
Last year, it expanded its portfolio to include Mondoil Enterprises, a small American firm with an indirect 8 per cent interest in a block in Ivory Coast that is home to the nation’s biggest gasfield. Before the acquisition, Mondoil was already connected to RAK Petroleum through Mr Mossavar-Rahmani, the chairman of both companies as well as of DNO.
"It took a couple of years to get our feet on the ground, but in the end a first-class company was put together with a great management and solid assets," Mr Shihabi said. "They looked at IPOing in London, but decided on Norway because there's a lot of liquidity of these sort of relatively small oil plays on their exchange and you have the brand recognition for DNO – and that always helps."
The existing shareholders will be allotted restricted shares and an associated number of founder shares amounting to about 90 per cent of their shareholding in RAK Petroleum, and the remaining 10 per cent will be marked as unrestricted. Existing shareholders will have their shares locked up for six months following the listing, planned for November 7 following regulatory approval.
halsayegh@thenational.ae
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