Adnoc Distribution will gain control of 580 fuel stations in South Africa.
The deal is expected to be concluded in 2027. Picture: Katy Blackwood/NurPhoto via Getty Images
Abu Dhabi National Oil Co’s retail unit has confirmed talks are taking place to acquire 100% of Shell Downstream South Africa from Shell South Africa Holdings, at a $1 billion (over R16 billion) enterprise value, giving the Emirati company access to Africa’s biggest economy for the first time.
The deal will see Adnoc Distribution gain control of 580 retail stations in the country as well as wholesale fuel, aviation and lubricants operations.
In a statement released on Tuesday, Adnoc said the deal is expected to close in 2027, subject to customary regulatory conditions, other conditions precedent and closing conditions.
Adnoc will not change Shell
The Abu Dhabi company said a 28% stake will be sold to a local empowerment partner and Employee Stock Option Plan (ESOP) after completion of the deal. This is done with a focus on energy security, job creation and inclusive economic participation priorities through the local partner.
An ESOP is an equity compensation arrangement where a company grants its workers the right to purchase shares of its stock at a fixed, predetermined price.
Adnoc added that it will enter into a long-term brand licensing agreement upon completion of the Proposed Acquisition to retain the Shell brand for retail service stations and lubricants businesses in South Africa.
Milestone for Adnoc
Adnoc CEO, Bader Saeed Al Lamki, said the deal marks a significant milestone in their international growth strategy and also reflects confidence in South Africa as a high-potential, well-regulated fuel retail sector.
“Shell Downstream South Africa is a respected and financially strong business with deep roots in the local economy, and its values and ambitions align closely with our own,” he added.
“By bringing it into the Adnoc Distribution family, we plan to accelerate our international expansion, diversify our platform and create sustainable long-term value for our shareholders, our partners and the customers and communities that this business has proudly served for decades.”
Why SA?
The Abu Dhabi company said the South African fuel retail sector offers attractive fundamentals.
“South Africa’s investments in critical transport infrastructure, alongside a growing driving-age population, reinforce the growth potential of fuel consumption,” said the company.
“The country benefits from a strong and transparent regulatory framework for fuel retail, with pricing structures designed to insulate margins against inflation and currency volatility.
“Together, these characteristics create a compelling environment for sustainable growth, consistent performance and cash generation, supporting long-term value creation for shareholders.”
SA partner to be appointed
The company said it will seek to appoint a partner with an understanding of the South African sector, including the regulatory environment, local operating requirements, and alignment with the objectives of the country’s broad-based black economic empowerment (B-BBEE) legislation.
“The proposed acquisition is expected to be value-accretive to Adnoc Distribution, bolstering its earnings per share by 6% in the first full year after completion, and is projected to generate an IRR in excess of the hurdle rate for the company’s fuel and convenience retail business,” it said.
“South Africa represents the fourth country where Adnoc Distribution would operate and follows its acquisition of a 50% stake in Total Energies Marketing Egypt in 2023 and the 2018 launch of its retail fuel stations in Saudi Arabia.”
