OQ SAOC has announced its intention to offer up to 49% of its shares in OQ Base Industries (OQBI) through an initial public offering (IPO) and float on the Muscat Stock Exchange (MSX).

 

Upon regulatory approval, the intended listing would provide investors with the opportunity to invest in Oman’s only production company of methanol, ammonia, and LPG products.

 

The subscription period is expected to commence in November 2024, on receipt of required approvals from the Financial Services Authority (FSA) of Oman.

 

The listing of OQBI on the MSX is expected to take place in December 2024.

 

Diversifying shareholder base

The proposed offering is a step towards diversifying the company’s shareholder base, broadening the company’s network and visibility among key stakeholders and providing liquidity for shareholders.

 

Bank Dhofar SAOG, Bank Muscat SAOG and Morgan Stanley & Co International have been appointed as joint global coordinators with each of Bank Dhofar SAOG and Bank Muscat SAOG also appointed as issue managers. In addition, Kamco Investment Company and BSF Capital have been appointed as joint bookrunners.

 

The offering provides investors exposure to the sultanate’s only integrated producer of methanol, ammonia, and LPG products (which comprise propane, butane, condensate and cooking gas). The company has strong fundamentals and a demonstrated track record of successful implementation of expansion. 

 

The company is active throughout the natural gas value chain, operating three advanced plants with a combined nameplate production capacity of 1,816 ktpa. OQBI is in a unique position, as it operates in the tax-exempt Salalah Free Zone in the south of Oman, close to Oman’s largest port, Port of Salalah, acting as a gateway to markets across Europe, Mena, and wider Asia. The company has a differentiated beneficial structure for investors, currently being a 100% government owned entity.

 

Strategic advantages

OQBI benefits from Oman’s fundamental and strategic advantages, including: its location in a province with direct access to global shipping routes and logistics hubs; (iii) a stable and robust industry environment for methanol, ammonia, and LPG products, with growing demand, which has attracted many international investors; (iv) the company is situated in an attractive investment jurisdiction and being strategically located within the Salalah Free Zone.

 

The combination of integrated operations, a diversified product portfolio, an attractive quartile cost position, operational excellence and cost discipline has enabled OQBI to achieve robust revenues and profitability across the periods under review. For the year ended December 31, 2023, the company’s revenue was $510 million, and its adjusted EBITDA margin 43.1%.

 

Ashraf Hamed Al Mamari, Group CEO of OQ, noted: “We are pleased to announce the upcoming public offering for OQ Base Industries, one of our key subsidiaries. This follows the success of three previous offerings, which drew high interest from investors. The strong demand has been fuelled by our solid financial performance, operational strength, and attractive dividend policy. This strategic step reflects our commitment to growth and ongoing investment in the energy sector.”

 

Eng Ali Mohammed Al Lawati, Chairman at OQ Base Industries, said: “The offering up to 49% of the company’s shares to the public is a pivotal step, advancing OQ’s growth and aligning with its ambitions to expand its product reach to global markets. He added that this move strengthens governance and transparency within the company.”

 

He further highlighted the importance of this moment for OQ Base Industries stating that: “It reflects the dedicated efforts of all employees and the strategic value the company holds. The offering opens doors for local, regional, and international investors to invest in a major Omani asset with considerable growth potential in the global market.”

 

Khalid Khalfan Al Asmi, Chief Executive Officer at OQ Base Industries, stated: "This milestone is a testament to our employee’s dedication and the trust we’ve earned from clients and partners. Oman’s strategic location has been a key strength, supporting our competitive business model and increasing the global appeal of our products."

 

Key details of the offering

OQ SAOC owns 100% of the capital of OQBI directly and through its subsidiaries, Takamul Investment Company and OQ Salalah Industries Company SAOC and the selling shareholders expect to sell up to 49% of the total issued share capital of OQBI, with the company and OQ retaining the right to amend the size of the offering at any time before the end of the subscription period at their sole discretion, subject to applicable laws and the approval of the FSA.

 

All the shares being sold by the selling shareholders are existing ordinary shares and the company will not receive any proceeds from the sale of the shares in the offering, all of which will be paid to the selling shareholders. The offering expenses will be paid by the selling shareholders.

 

Dividend policy

The company intends to pay dividends twice each fiscal year after the offering.

It intends to maintain a robust dividend policy designed to return to shareholders substantially all of its distributable free cash flow after providing for growth opportunities and subject to credit rating considerations.

 

The company expects to pay a dividend of OMR32.7 million ($85 million) for the fiscal year 2024. It expects to pay the first dividend distribution of approximately OMR24.5 million for the first nine months of 2024 by January 2025 and expects to pay the second dividend distribution for the last three months of 2024 of approximately OMR8.2 million by April 2025.

 

Thereafter, for the next two financial years ending  December 31, 2025 and December 31, 2026, the company intends to pay a dividend which is a minimum of five per cent increase on the dividend paid for the previous year.

 

For the fiscal year ended December 31, 2027 and onwards, the company expects to distribute any cash not specifically reserved for general corporate purposes, growth investment or M&A activity.--TradeArabia News Service