Abu Dhabi National Oil Company (Adnoc) and its affiliates, the Adnoc Group, which currently owns 80% of the common shares in Abu Dhabi National Oil Company for Distribution (Adnoc Distribution), stated on Wednesday their intention to issue about 375 million shares (the Shares).

The shares represent approximately 3% of Adnoc Distribution's registered share capital (the Share Offering), and were made available through an enhanced bookbuild offering at an initial offer of Dhs4.36 per share to selected qualified institutional investors following Rule 144A and Regulation S of the US Securities Act of 1933, as enacted (the US Securities Act).

Simultaneous with the Share Offering, Adnoc decided to launch about $1.195 billion in senior unsecured notes payable in 2024 that are convertible into existing Adnoc Distribution common shares, representing about 7% of the company's registered share capital under certain conditions (the Exchangeable Bonds), underneath a private placement to such qualified investors outside the United States following Regulation S of the United States Securities Act (the "Exchangeable Bond Offering" and, along with the Share Offering, the "Combined Offering").

The Combined Offering would not be offered to the general public in the United Arab Emirates or any other country.

Collectively, the Share Offering and, anticipating exchange and payment in shares of all Exchangeable Bonds in compliance with their terms, the Exchangeable Bond Offering, comprise a Combined Offering by Adnoc of roughly 10% of Adnoc Distribution's registered share capital. The Combined Offering's combined price of Dhs4.82 is nearly 5% higher than Adnoc Distribution's three-month volume-weighted average share price.

The Exchangeable Bond Offering would have a three-year maturity and would be granted at a 100% issue price with a coupon of 0.70 % per year, paid semi-annually in installments in June and December of each year. The exchange premium would be 15% higher than the reference price of Adnoc Distribution shares, leading to a Dhs5.01 exchange price.

The deal is the GCC's first combined equity and exchangeable bond issuance, underscoring Adnoc's innovative strategy to extracting value from its properties. Adnoc now has better access to a new and larger investor base, including those interested in an equity-linked bond investment, thanks to the novel deal structure and appealing method of financing. The Exchangeable Bonds provisions also allow for the monetization of Adnoc Distribution shares at a premium to the cost of the Share Offering.

Following the company's Initial Public Offering (IPO) in December 2017, Adnoc pledged to enhance the free float in Adnoc Distribution, which was reinforced by the sale. Morgan Stanley Capital International (MSCI) declared on 11th May 2021, Adnoc Distribution has also been included in the MSCI Emerging Markets Index, beginning May 27, 2021. The organization would be one of just nine publicly traded firms in the UAE to be included in the index.

Following the end of the Combined Offering's book-building process, the final terms of the Combined Offering are due to be revealed. Settlement of the Share Offering is anticipated on or around May 31, 2021, and payment of the Exchangeable Bond Offering is scheduled on or around June 4, 2021.

Under the terms of both the Share Offering and the Exchangeable Bond Offering, Adnoc has undertaken a lock-up period of 90 calendar days from the settlement date. The Exchangeable Bonds are scheduled to be admitted for listing and trading on the Vienna MTF, an exchange-regulated market administered by the Vienna Stock Exchange.

“At the time of Adnoc Distribution's IPO, Adnoc indicated its intention to offer more ADNOC Distribution shares at the proper moment, to improve liquidity and accessibility to an attractive investment opportunity,” said Dr. Sultan Bin Ahmed Al Jaber, Minister of Industry and Advanced Technology and Managing Director and Adnoc Group CEO of Adnoc. Today's declaration comes after the placement of 10% of the existing share capital in September 2020, and it is the GCC's first combined equity and exchangeable bond issuance.

“Presuming all Exchangeable Bonds are converted and paid in shares, the deal would expand Adnoc Distribution's free float to 30%, with Adnoc keeping a 70% dominant position in the firm, as we continue to see considerable growth potential.”

The deal also represents another step forward in our wealth creation plan, allowing ADNOC to extract considerable value from its assets.” Adnoc Distribution has continued to deliver on its development aspirations since its IPO, offering a variety of new customer-oriented offerings and strengthening its dividend policy.

The Joint Global Coordinators and Joint Bookrunners for the Share Offering are Citigroup Global Markets Limited and First Abu Dhabi Bank PJSC. Citigroup Global Markets Limited is the Global Coordinator and Bookrunner for the Exchangeable Bond Offering, with Abu Dhabi Commercial Bank PJSC and First Abu Dhabi Bank PJSC acting as Co-Bookrunners (together, the "Banks").