Khaleej Times - UAE: Adnoc sets IPO price at Dh2.25 to Dh2.43; could raise up to $2 billion

Adnoc Gas initial public offering (IPO) is a good opportunity for investors as the company is expected to pay good dividends to its shareholders after listing on the Abu Dhabi Securities Exchange next month, experts say.

Vijay Valecha, chief investment officer at Century Financial, said Abu Dhabi National Oil Company (Adnoc) intends to raise its annual target dividend from $3.25 billion by five per cent per annum on a dividend per-share basis between 2024 to 2027.

“Based on the expected IPO price range, that would entail a dividend yield between 6.5 per cent and 6.9 per cent. This is an attractive proposition for income investors,” Valecha told Khaleej Times on Thursday.

Based on the expected dividend yield, he said Adnoc offers superior value to prospective shareholders and is much better priced than its developed market peers. “It is worth noting that UAE doesn't have a dividend tax so we can anticipate substantial global interest in this issue,” he said.

Over the past two years, Adnoc has listed petrochemicals company Borouge, fertilisers and clean ammonia products maker Fertiglobe, and Adnoc Drilling. It also plans to float its logistics and services unit.

$50.8b valuation likely

The Abu Dhabi-based energy giant, which floated its IPO price range on Thursday, would offer 3.07 billion shares in Adnoc Gas to sell four per cent stake in its gas business that is expected to raise Dh7.46 billion ($2 billion). It offers shares at Dh2.25-Dh2.43 ($0.61-$0.66), valuing the company at $47-$50.8 billion.

The final offer price will be determined through a book-building process and is expected to be announced on March 3 while trading on the Abu Dhabi Securities Exchange is expected to start on March 13.

The subscription period for UAE retail investors starts today and will continue until March 1, while the book-building period for qualified investors starts today and ends on March 2.

“Investors purchased all the shares on offer within an hour,” a source close to the company told AFP, citing a message sent to investors.

Atik Munshi, managing partner at FinExpertiza UAE, said the investment market in the UAE particularly IPO is facing favourable winds and thus Godspeed is expected for Adnoc Gas too.

"The offer price seems to be calculated on the dividend policy which would be attractive to many investors plus the chance to have a higher value on listing is another advantage. I would not be surprised if the IPO is subscribed multiple times," Munshi told Khaleej Times on Thursday.

The Abu Dhabi Pension Fund, South Africa’s Alpha Wave Ventures and Abu Dhabi’s IHC Capital Holding are among the cornerstone investors, as well as other Emirati-controlled entities, committing a combined $850 million.

Biggest share floatation

The market experts said the IPO will raise over $2 billion at the top of its range and it would be biggest share floatation this year so far. Only Dh6.12 billion ($1.67) billion has been raised in IPOs across the Middle East, Africa and Europe this year so far, according to Bloomberg.

Last year, the UAE recorded 12 listings that raised $11 billion. In addition, Americana Restaurant also raised $1.8 billion through the joint listing on the ADX and Saudi Stock Exchange in late 2022.

Valecha said it is widely agreed that the transition to a carbon-free future will not be straightforward, and natural gas can play a vital role as a bridge during this period, he said.

“Adnoc Gas is well-positioned to take advantage of this trend, with its 10 billion standard cubic feet of daily gas output. Adnoc presents an excellent opportunity for investors to add to their portfolio,” Vijay Valecha, chief investment officer at Century Financial, told Khaleej Times on Thursday.

The UAE is among the top 10 gas producers of the world and Adnoc Gas has access to 95 per cent of the country’s natural gas reserves. It supplies more than 60 per cent of the UAE's gas needs and spending heavily on its infrastructure to boost its production capacity.

First Abu Dhabi Bank and HSBC Bank Middle East Limited have been appointed as joint global coordinators. Abu Dhabi Commercial Bank, Arqaam Capital Limited, BNP Paribas, Deutsche Bank, London Branch, EFG-Hermes UAE Limited (acting in conjunction with EFG Hermes UAE LLC) and International Securities have been appointed as joint bookrunners.

First Abu Dhabi Bank has also been appointed as the lead receiving bank while Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank and Al Maryah Community Bank have been appointed as the receiving banks.