UAE car culture to propel Adnoc Distribution IPO, says deputy CEO

Adnoc deputy head John Carey says shares will be "very competitively priced".
Demand for fuel and convenience among drivers will underpin what could be the UAE’s biggest IPO in a decade, according to the company’s deputy head.
By Bloomberg
Mon 27 Nov 2017 05:57 PM

Demand for fuel and convenience among drivers will underpin what could be the UAE’s biggest IPO in a decade, according to the company’s deputy head.

Abu Dhabi’s Adnoc Distribution plans to start self-service gas stations, an option not currently available in the country, and to charge motorists who prefer having attendants fill their vehicles. With temperatures in the arid UAE typically reaching 50 degrees Celsius in the summer, the company expects more of its customers to use the gas-attendant service than in other markets.

“I see huge opportunity within the UAE,” John Carey, Adnoc Distribution’s deputy chief executive officer, said Sunday in an interview. Investing in the convenience-store business will produce “low-hanging fruit,” he said.

Abu Dhabi National Oil Co., which pumps most of the crude in the UAE, is seeking to raise as much as $2 billion from the sale of up to 20 percent of the unit. Adnoc is holding investor roadshows this week.

Dubai Stations

Governments in oil-producing countries across the Arabian Gulf are looking to sell assets to raise cash to invest in new businesses and reduce their reliance on crude exports. Adnoc plans to offer shares for a minimum of AED 2.35 (64 cents) and a maximum of AED 2.95 valuing the business at as much as $10 billion. It will announce the final price on December 8 and shares will start trading on Dec. 13.

As in several other Gulf nations, the UAE’s oil wealth and decades of government subsidies on fuel have contributed to a lifestyle built around driving. Luxury sports utility vehicles and U.S.-made muscle cars jostle on highways of as many as 14 lanes that sprawl across the desert. Motorists who obey the speed limit can hurtle between Abu Dhabi and Dubai at up to 140 kilometers per hour (87 miles per hour).

Adnoc Distribution plans to open filling stations next year in Dubai and in neighboring Saudi Arabia, where the company will seek franchise partners, Carey said. Dubai, the only UAE emirate where the company doesn’t already operate, is “under-serviced,” he said.

Abu Dhabi National Oil Co. for Distribution PJSC, as the unit is formally known, expects the market for gasoline and other fuels to grow 3 percent to 5 percent a year in the UAE, Carey said.

The potential $8 billion to $10 billion valuation Adnoc Distribution could achieve is at the lower end of a range estimated earlier this year. The company could be worth between $10 billion and $14 billion, people familiar with the matter said in July. Adnoc didn’t comment at the time on that valuation.

The shares will be “very competitively priced,” Carey said. “In terms of the pricing, we’ve done it to ensure a successful IPO and ensure that those people who invest have a successful after-market performance.’’

Comeback

IPO activity in the UAE is showing signs of picking up after only two deals were completed throughout 2015 and 2016. Emaar Properties PJSC raised $1.3 billion from the sale of shares in its development unit earlier this month, while Mubadala Investment Co. expects to list its Emirates Global Aluminium unit next year.

Raising $2 billion would make the Adnoc Distribution share sale the biggest in the country since Dubai ports operator DP World Ltd. sold shares in 2007, according to data compiled by Bloomberg.

“I like the company and I like its business model, but we’re still studying it and will probably wait until after the IPO before deciding whether to buy it,” said Marwan Haddad, who helps manage about $100 million in Middle East assets at Al Mal Capital PSC in Dubai. “There’s not a lot of room for upside,” said Haddad, who purchased shares in the Emaar unit and said Al Mal usually holds stock for three to five years.

Abu Dhabi is pursuing a different model for asset sales than Saudi Arabia. The world’s biggest crude exporter plans to sell a stake directly in the state oil producer next year, while Abu Dhabi has ruled out listing Adnoc at group level in favor of seeking investors for the parent company’s individual businesses.

Adnoc, which raised $3 billion from bond sales in October, will try to sell stakes in some units and seek partners for others, CEO Sultan Al Jaber said in an interview this month.

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