Saudi Arabian investment fund to buy ADES International

Innovative Energy has made an all-cash $12.5 per share offer to take UAE-based oil & gas drilling and production services provider ADES International into Saudi hands.

Saudi Arabia’s Public Investment Fund (PIF) lined up a cash offer to take ADES private, with the group unhappy with its performance on the London market.

ADES’ major shareholder, ADES Investments, wholly owns Innovative. Should the offer be approved, Saudi’s Public Investment Fund (PIF) would provide the funds for Innovative to acquire the shares.

Innovative Energy said that the all-cash $12.5 per share offer to buy ADES International values ADES at $516 million, excluding treasury shares. The offer is a 40 per cent premium to ADES’ closing price on 5 March and a 35 per cent premium on the last 12 months.

ADES Investments owns 63.9 per cent of ADES, while Zamil Investments owns another 4.9 per cent. The latter has backed the sale.

ADES was listed on the main market of the London Stock Exchange in 2017. It acquired 34 rigs and has a particular focus on Egypt, although some operations are conducted in Saudi Arabia and Algeria.

Innovative Energy’s statement claimed that the company had performed well, EBITDA increased from $80.3 million to $193.4 million from 2017 to 2019. However, its share price fell by 25.5 per cent over the period and trading liquidity is currently low.

According to Innovative Energy, this does not justify the costs associated with public listing and “there are challenges around raising capital”.

The company believes that ADES “will benefit from a longer-term approach to strategy and decision making and that ADES International will have greater flexibility to pursue strategic opportunities, including in relation to capital allocation and growth. For example, Innovative Energy believes that ADES International will be able to gain further exposure in underserved areas of the Middle East market as well as continuing to compete in its existing markets”.

It is worth noting that ADES would move its operational office to Saudi Arabia within a year of the closing of the deal.

As for ADES Investments, it is owned 67 per cent by Intro Investments – owned by the Abbas family – and 33 per cent by Sky Investments – owned by the Hussein family. ADES Investments holds 26,349,242 shares in ADES International.

The independent directors of ADES International consider the terms of the offer to be fair and reasonable so far as the ADES shareholders are concerned. The independent directors intend unanimously to recommend that shareholders accept the offer.

In related news, ADES announced earlier this year that it was searching for a new chief financial officer (CFO) following the resignation of Khaled Hassan, the group’s current CFO. Hassan has decided to step down from his position to pursue a greater role outside of the group.