Adnoc raises $317m to boost logistics unit's bid to join MSCI index

Abu Dhabi National Oil Company has raised $317 million through an institutional share sale to boost its logistics unit's case for inclusion in the MSCI Emerging Market Index.

The offering of 222 million shares in Adnoc Logistics and Services, completed through the “accelerated bookbuilding process” of just four hours, corresponds to about 3 per cent of the company's issued share capital.

The company set the selling price at Dh5.25 ($1.43) and achieved approximately seven-times oversubscription, the company said on Friday in a filing to the Abu Dhabi Securities Exchange, where its shares trade.

The settlement of the deal is expected on or around September 3. Adnoc L&S expects to be admitted on the MSCI index in November, after its next quarterly review.

Shares of Adnoc L&S rose after the announcement, up about 1.8 per cent.

Once the new shares are admitted for trading, Adnoc L&S’s free float – company shares that are not restricted and can be publicly traded – will increase from 19 per cent to about 22 per cent.

A greater free float is expected to boost trading in its shares, improve liquidity, diversify the shareholder base and will provide “a clear pathway towards MSCI index inclusion”, said Khaled Al Zaabi, group chief financial officer of Adnoc.

The offering was also in response to heightened interest from international investors, who have shown confidence in the strength of stocks on the ADX, said Nicholas Gleeson, chief financial officer of Adnoc L&S.

“There's a strong appetite to invest in our stock … we've had a number of large funds internationally expressing a desire to see greater liquidity in the stock,” Mr Gleeson told The National on Friday.

“We're going to see an increase in the international investor base as a component of our overall book as a result of their ability now to take larger positions in the stock or to participate in the stock because of the increasing liquidity as a result of [Thursday's] announcement,” he added.

The Emerging Markets Index is tracked by investors managing trillions of dollars in assets. The benchmark is designed to measure the performance of large and mid-cap stocks across 24 emerging markets and has more than 1,320 constituents.

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Index inclusion usually supports increased liquidity for a company’s shares and can help to attract more regional and global institutional investors.

Three companies – Adnoc Gas, Salik and the Dubai Electricity and Water Authority – boosted the UAE's presence in May with their inclusion.

The L&S arm would be the fourth Adnoc company to be admitted to the index, after Adnoc Distribution and Adnoc Drilling.

Other UAE companies that are part of the index include First Abu Dhabi Bank, Emaar Properties, e&, Emirates NBD, Aldar Properties and Abu Dhabi Commercial Bank.

“If Adnoc L&S is included in the MSCI index, it is expected to contribute to the further diversification of the company’s investor base and strengthen awareness of its differentiated proposition as a leader in global energy maritime logistics,” Wam reported.

Adnoc L&S delivers energy products and solutions to more than 100 customers in about 50 countries through its three business units, including integrated logistics, shipping and marine services.

The company has reported a 10 per cent annual rise in its second-quarter net profit, after the strong performance of its business units. Revenue for the period rose about 40 per cent to $1.25 billion.