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Adnoc limits Distribution IPO to 10pc

7 Dec 2017, 1.14 pm GMT

Adnoc limits Distribution IPO to 10pc

Dubai, 7 December (Argus) — Abu Dhabi state-owned Adnoc has settled on a more modest initial public offering (IPO) of its Distribution business than expected.

The float on the Abu Dhabi Securities Exchange (ADX) planned for mid-December will comprise just 10pc of the unit, the bottom end of the 10-20pc previously indicated. And the offer price range has fallen and narrowed to between 2.35 Emirati dirhams ($0.64) and 2.65 dirhams, according to market communications from advisor Bank of America Merrill Lynch.

Late last month Adnoc advised it would sell up to 20pc of the Adnoc Distribution subsidiary, or up to 2.5bn shares, on ADX with an offer price range of 2.35 dirhams to 2.95 dirhams per share.

Based on the revised listing plans, the IPO will offer 1.25bn shares at up to 2.95 dirhams, potentially raising up to 3.3bn dirhams or $900mn, rather than $2bn as previously projected if had listed 20pc at up to 2.95 dirhams per share. The final price range will not be disclosed until tomorrow after a book building process is completed.

"Our objective is to deliver a successful and solid IPO," Adnoc said.

The listing will be issued in two tranches; the first will be targeted towards retail investors and a minimum subscription has been set at 10,000 dirhams with any additional investment to be made in 1,000 dirham increments. The second tranche — representing 95pc of the offer shares — will be targeted towards institutional investors, including UAE government entities. The minimum subscription in the second tranche is set at 5mn dirhams.

"Of note, the retail tranche received unprecedented interest and is currently over 20 times oversubscribed. The institutional tranche also attracted significant interest and will bring new, world class international investors to the ADX," the Adnoc spokesman said.

Adnoc says the funds raised in the IPO will be used to grow fuel and non-fuel revenue in existing markets and to expand operations in the UAE and internationally, including through the introduction of a franchise model in selected international markets.

Adnoc Distribution is the UAE's largest retail fuel distributor and convenience store operator, with over 360 outlets. It is also the leading marketer and distributor of fuels to commercial, government and military customers throughout the UAE, and provides refuelling and related services at seven international airports in the UAE. The unit is split into four divisions; Retail, Allied Services, Corporate and Aviation.

Adnoc Distribution reported a profit of 1.3bn dirhams in 2015 and 1.8bn dirhams last year and reported earnings before interest, tax, depreciation and amortization (Ebitda) of 1.6bn dirhams in 2015 and 2.1bn dirhams last year. Total revenue was 21.2bn dirhams in 2015 and 17.7bn dirhams last year.

In November, the Distribution business took on debt, having entered into a credit facility comprising a $1.5bn five-year, bullet maturity term loan facility and a $750mn five-year revolving credit facility. The term loan facility was drawn in full and the proceeds, together with available cash and bank balances, were used to repay a capital contribution to Adnoc of 6.3bn dirhams, and to pay an extraordinary interim dividend to Adnoc of 2.1bn dirhams.

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