Adnoc Distribution to buy 50% stake in TotalEnergies Egypt in its largest investment

Adnoc Distribution, the UAE’s largest fuel and retail distributor, will acquire a 50 per cent stake in TotalEnergies Marketing Egypt for approximately $186 million as part of its global expansion plans.

Under the agreement signed with TotalEnergies Marketing Afrique, Adnoc Distribution also has the provision for additional earn-out of up to $17.3m if certain conditions are satisfied.

The overall deal marks the Abu Dhabi company's largest investment to date, it said in a statement on Thursday to the Abu Dhabi Securities Exchange, where its shares are traded.

Established in 1998, TotalEnergies Egypt is among the top four fuel retail operators in the country.

The deal will "develop future growth opportunities of TotalEnergies Egypt through unlocking value potential and exploring beneficial synergies in fuel distribution, lubricants and aviation businesses driven by economic growth and post Covid recovery", Adnoc Distribution said.

The acquisition is expected to be completed in the first quarter of 2023, subject to regulatory approvals.

“This acquisition marks a significant milestone in Adnoc Distribution’s international growth story," said Dr Sultan Al Jaber, Minister of Industry and Advanced Technology, managing director and group chief executive of Adnoc and chairman of Adnoc Distribution.

"Egypt is the Arab world’s most populous country and we look forward to entering such a dynamic market. The acquisition is also well-aligned with the Industrial Partnership for Sustainable Economic Growth between the UAE, Bahrain, Egypt and Jordan and will leverage the strengths of both the UAE and Egypt to boost growth in the related markets."

Adnoc Distribution, which had 464 retail fuel stations and 350 convenience stores in the UAE as of March 31, has been expanding its portfolio.

It opened its first stations outside the UAE in Saudi Arabia, in 2018, with 55 stations operational across the kingdom as at the end of March.

Adnoc Distribution, which reported a 6 per cent rise in first-quarter net profit, said in March that it was on track to deliver 60-80 stations across the UAE and international markets by the end of this year.

The company’s Adnoc Voyager lubricants are also exported to 20 countries.

Adnoc Distribution's partnership with TotalEnergies includes a diversified portfolio comprising 240 fuel retail stations, more than 100 convenience stores, 250 lube changing stations and car washes, as well as wholesale fuel, aviation fuel and lubricant operations, the company said.

The acquisition will also involve the refurbishment of several service stations to Adnoc branding, with certain future sites being constructed under the Adnoc brand.

“Egypt’s fuel retail market is highly attractive with exciting potential for future growth," said Bader Al Lamki, chief executive of Adnoc Distribution.

"Due to its young and expanding population, alongside a series of progressive economic reforms, Egypt has recorded positive GDP [gross domestic product] growth with a strong outlook."

The acquisition will be earnings accretive to Adnoc Distribution from the first year post closing, the company said.

The move will support Adnoc Distribution's strategy to establish itself as a "regional leader in the fuel distribution sector" and unlock new earnings potential in its next phase of growth, it added.

“This acquisition by Adnoc Distribution reaffirms our commitment to expanding our business in attractive international growth markets," Mr Al Lamki said.

"It is a testament to our ability to leverage our experience in both fuel and non-fuel retail, to deploy cash to accelerate our international expansion, and to realise natural business synergies and partnership opportunities that allow us to quickly and efficiently enter new and dynamic markets."

Last month, Adnoc Distribution also struck three new deals with its parent, Adnoc, as part of its growth strategy that focuses on product diversification.

The company entered into an agreement with Adnoc for the sale of base oil, which it will purchase until the end of 2026.

It also struck a white spirit supply agreement with Adnoc to help the company increase its market share in the long term, and a new carbon black supply agreement, which will run until the end of this year.

White spirit is a petroleum-derived liquid used as a solvent in painting, while carbon black is used in tyres and rubbers.