December 13, 2017
Volume 17 Issue 52
Adnoc Distribution IPO to Support Lubes Brand
Adnoc Distribution raised 3.1 billion dirham (U.S. $851 million) from an initial public offering that closed last week. The sale of a 10 percent stake will see Adnoc’s Voyager brand of finished lubricants sold in new markets and continuation of a supply agreement sourcing API Group III base oils from Adnoc Refining. The offering marks the first time a national oil company has opened its distribution business to international investors.
According to its IPO prospectus issued last month, the company exports lubricants to distributors in 19 countries outside of the United Arab Emirates and markets the brand through 360 retail fuel stations in the UAE. The Abu Dhabi blender believes the global push for lower emissions is likely to be a strategic benefit as it boosts demand for higher quality lubricants.
“Sales of our Voyager lubricants will continue to grow as an increasing number of original equipment manufacturers certify our products for use in their engines, machinery and equipment, and as we expand the [number of] countries in which we distribute our lubricant products,” it said in November’s prospectus.
Adnoc Distribution operates a lubricant blending plant in Abu Dhabi with production capacity of approximately 50,000 metric tons per year, producing more than 125 different lubricants and greases from Group I, II and III base stocks, the company says. Its Group I and II base oils are supplied under separate agreements with ExxonMobil Petroleum & Chemical BVBA and GS Caltex Corp., respectively.
In October, Adnoc Distribution inked a five-year agreement – which expires on Dec. 31, 2022 – to purchase specified volumes of base oils from Adnoc Refining, also known as Takreer, a subsidiary of Adnoc. The companies have not disclosed whether Adnoc Refining will displace the Group II supplied under the existing agreement with GS Caltex.
After Adnoc Distribution previously indicated it could sell a 20 percent stake, investors’ hopes the offering might provide access to a lucrative value chain will be dampened, said Stefan Mueller, senior principal analyst at IHS Chemical. “I don’t think that there is any impact, as Adnoc still owns 90 percent, so investors gain very little control over Adnoc distribution.”
The company sold 1.25 billion shares at 2.50 dirham per share in the IPO, indicating a market capitalization upon listing of approximately $8.5 billion. As recently as last month, Adnoc Distribution set initial price guidance in the 2.35 to 2.95 dirham range but lowered the maximum price to 2.65 dirham shortly afterwards, before settling for 2.50 dirham last Friday.
Earlier reports suggested the company could be worth as much as $14 billion, and the valuation at the lower end of expectations shows how much investors are prepared to pay for energy-related assets, analysts say. Adnoc Distribution’s valuation also has implications for Saudi Aramco’s highly anticipated sale of 5 percent of its shares, which it hopes will price the company at $2 trillion.
Still, Adnoc claims the offering was 22 times oversubscribed by retail investors, is the largest IPO on the Abu Dhabi Securities Exchange (ADX) in the last decade and the first IPO there in six years.
Listing and trading on the ADX is expected to commence today under the symbol “ADNOCDIST.”