The sale of shares comes within days after Morgan Stanley Capital International (MSCI) announced that Adnoc Distribution had been included as part of the MSCI Emerging Markets Index, effective 27 May 2021
 
Abu Dhabi National Oil Company announced on Wednesday its intention to raise $1.64 billion by issuing exchangeable bonds and selling 3.0 per cent (375 million shares) of its share capital in its subsidiary Adnoc Distribution to “certain eligible” institutional investors.

The sale of shares comes within days after Morgan Stanley Capital International (MSCI) announced that Adnoc Distribution had been included as part of the MSCI Emerging Markets Index, effective 27 May 2021.

The share sale will be through a book building process at an offer price of Dh4.36 per share to certain eligible institutional investors, said Adnoc, which holds 80 per cent of the common shares in its subsidiary.

Adnoc also proposed to issue $1.195 billion senior unsecured bonds due in 2024 that are exchangeable into existing common shares of Adnoc Distribution constituting approximately seven per cent of the company’s registered share capital. The sale will be under certain conditions “pursuant to a private placement to certain eligible investors outside the US. The combined offering will not be available to the public in the UAE or any other jurisdiction,” Adnoc said in a statement.

The exchangeable bond offering represents a combined offering by Adnoc of approximately 10 per cent of the registered share capital of its subsidiary. “The blended price of the combined offering of Dh4.82 is approximately 5.0 per cent above the 3-month volume-weighted average share price of Adnoc Distribution,” it said.

The bond offering will have a maturity of three years and will be issued at an issue price of 100 per cent with a coupon of 0.7 per cent per annum, payable semi-annually in arrears in June and December each year. The exchange premium will be 15 per cent above the reference price of Adnoc Distribution shares, resulting in an exchange price of Dh5.01.

The statement said the transaction is the first combined equity and exchangeable bond offering in the GCC, once again highlighting Adnoc’s novel approach to unlocking value from its assets. “The innovative deal structure and attractive form of financing provides Adnoc with greater access to a new and broader investor base, including those that are interested in an equity-linked bond investment. The terms of the exchangeable bonds also provide an opportunity for the monetization of Adnoc Distribution shares at a premium to the price of the share offering,” the company said.

The sale supports Adnoc’s commitment to increase the free float in Adnoc Distribution following the company’s IPO in December 2017. The company will be one of only nine UAE publicly listed companies to be part of the index. Its inclusion is expected to contribute to the diversification of its investor base and strengthen awareness of its unique value proposition.

Dr. Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and managing director and Adnoc Group CEO of Adnoc, said the announcement follows the placement of 10 per cent of the outstanding share capital in September 2020 and represents the first combined equity and exchangeable bond offering in the GCC.

“Assuming all the exchangeable bonds are exchanged and settled in shares, the transaction will increase the free float in Adnoc Distribution to 30 per cent, with Adnoc retaining a 70 per cent strategic stake in the company, as we continue to see significant growth potential. The transaction also marks a further milestone in our value creation strategy, enabling Adnoc to unlock significant value from its assets,” said Al Jaber.

The final terms of the combined offering are expected to be announced following the completion of the bookbuilding process for the combined offering. Settlement of the share offering is expected to be around May 31, and settlement of the exchangeable bond offering is expected to on or about June 4, 2021.

Adnoc has agreed to a lock-up period of 90 calendar days from the settlement date under the terms of both the Share Offering and Exchangeable Bond Offering. An application is expected to be made for admission of the Exchangeable Bonds for listing and trading on the Vienna MTF, an exchange-regulated market operated by the Vienna Stock Exchange.

Citigroup Global Markets Limited and First Abu Dhabi Bank are acting as the joint global coordinators and joint book runners. Citigroup Global Markets Limited is acting as the global coordinator and book runner, with Abu Dhabi Commercial Bank and First Abu Dhabi Bank acting as co-book runners, for the bond offering.