Saudi Arabia’s Ades International Holding, a provider of oil and gas drilling and production services, is set to launch its initial public offering (IPO) in Riyadh, which could be the largest in the kingdom this year. The company, which is backed by the Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia, plans to sell 30% of its shares to the public and raise about $1 billion.
Ades IPO Details
According to a statement issued on Monday, the IPO will consist of 338.7 million shares, which will include the issuance of 237.1 million new shares through a capital increase. The remaining 101.6 million shares will be offered by the existing shareholders, namely the PIF, ADES Investments Holding Ltd., and Zamil Group Investment Ltd.
The company has not disclosed the price range for the IPO yet, but it will announce it on September 18, after a book-building process that will run from September 10 to September 14. The final offer price will be determined based on the demand from institutional and retail investors.
The IPO is expected to be completed by the end of September, and the shares will be listed on the Saudi Stock Exchange (Tadawul). The company has appointed EFG Hermes, Goldman Sachs Group Inc., JPMorgan Chase & Co., and SNB Capital as financial advisors and global coordinators for the IPO.
Ades Growth Strategy
Ades was founded in 2007 and operates in Egypt, Algeria, Saudi Arabia, Kuwait, Iraq, and the UAE. The company provides onshore and offshore contract drilling, workover and production services, as well as technical support, rig management, and maintenance services.
The company was taken private in 2021 by a consortium led by the PIF, in a deal that valued it at about $516 million. Since then, the company has expanded its operations through acquisitions of rigs and assets from Weatherford International Plc and Nabors Industries Ltd.
The company aims to use the proceeds from the IPO to fund its growth strategy, which includes investing in new technologies, expanding its fleet of rigs and equipment, entering new markets, and pursuing merger and acquisition opportunities.
The company also plans to pay dividends to its shareholders starting from 2024, with a payout ratio of at least 25% of its net income.
Saudi IPO Market Outlook
The Ades IPO could be one of the biggest in Saudi Arabia this year, as the kingdom’s stock market has witnessed a slowdown in listings amid the Covid-19 pandemic and lower oil prices. According to data compiled by Bloomberg, less than $900 million has been raised through IPOs in Saudi Arabia this year, an 82% drop from a year ago.
However, the outlook for stocks has improved with a 14% rally in the Tadawul index since March lows, after earnings and relatively stable oil prices boosted optimism. The index reached a record high of 11,728 points on August 25.
The Ades IPO could also pave the way for more listings by companies that are backed by the PIF, which is one of the main drivers of Saudi Arabia’s economic diversification and Vision 2030 plan. The PIF has stakes in several sectors, including energy, technology, entertainment, tourism, healthcare, and mining.
Some of the potential IPO candidates that are linked to the PIF include ACWA Power International, a power generation company; Saudi Telecom Co., the largest telecom operator in the kingdom; and Saudi Arabian Military Industries (SAMI), a defense company.
