In a significant development on Wednesday, ADES Holding Co., a Saudi Arabian oil drilling company, attracted orders worth 286.9 billion riyals ($76.5 billion) for its $1.2 billion initial public offering (IPO), making it the largest IPO of the year in the country. The firm, backed by the kingdom's sovereign wealth fund, set the IPO price at 13.50 riyals per share, which gives it a market valuation of $4.1 billion.
The subscription rate for this IPO has reached nearly 63 times, indicating a robust demand in a market that has been relatively subdued compared to the last year. Earlier this month, Lumi Rental Co., another Saudi company, also received orders worth approximately $27 billion for its $290 million listing.
The strong interest in the ADES IPO could potentially encourage the Saudi government to move forward with its plans for a secondary offering of shares in Aramco (TADAWUL:2222). ADES is selling 237.1 million new shares while its shareholders – the Public Investment Fund, ADES Investments Holding, and Zamil Group Investment – are selling around 101.6 million shares, representing a total offering of a 30% stake in the company.
Retail investors will have an opportunity to participate in this offering from September 26 to September 28.
This share sale is anticipated to more than double Saudi Arabia's current IPO earnings of just $901 million, marking an 82% decline from last year and reaching the lowest for the equivalent period since 2020. However, there has been an 11% rally in the benchmark Tadawul index since its March lows and a surge in oil prices due to supply cuts from OPEC+, indicating an improving sentiment towards Saudi Arabia's IPO market.
In 2021, the Public Investment Fund partnered with major owners of then London-listed ADES to privatize the business, which was valued at about $516 million. Since then, ADES, which offers oil and gas drilling and production services in the Middle East and North Africa, has grown through acquisitions.
ADES' major clients include Saudi oil giant Aramco, Kuwait Oil Company, and North Oil Company in Qatar. These companies accounted for over 95% of ADES' backlog as of the end of last year.
The proceeds from the IPO will be used by ADES to reduce part of its debt and fund its growth strategy, as well as for general corporate purposes. EFG Hermes, Goldman Sachs Group Inc (NYSE:GS)., JPMorgan Chase & Co. (NYSE:JPM), and SNB Capital are serving as financial advisers and global coordinators for the IPO.
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