ADNH Catering IPO: Abu Dhabi company plans to list 40% of its shares on ADX

ADNH Catering, a unit of Abu Dhabi National Hotels, plans to list 40 per cent of its share capital on the Abu Dhabi bourse, as it seeks to leverage the economic momentum and listing boom in the Emirates this year.

The company plans to issue 900,000,000 shares with a nominal value of Dh 0.10 a share through an initial public offering on the main bourse of the Abu Dhabi Securities Exchange, it said on Monday.

All shares being offered for sale through the public float are held by the company's parent ADNH, which also trades on the ADX.

UAE retail and institutional investors, along with ADNH employees, can subscribe to the IPO through three dedicated tranches. Up to 10 per cent of the share offering will be made available for allocation to existing shareholders of ADNH Group.

The subscription period for the deal will begin on October 7 and will end on October 14 for UAE retail investors and eligible employees, while it will close October 15 for professional investors.

The company said its final offering price will be determined through a book building process and it expects its shares to start trading on the ADX in October after the regulatory approvals.

“ADNH Catering is a market leader in the UAE with approximately 28 per cent share of its addressable market and a diversified client base across five strategic sectors,” Clive Cowley, chief executive of ADNH Catering, said.

The company has clients across government and the private sector, “with over 90 per cent of our contracts lasting for over five years", he said.

Listing boom

ADNH Catering is the latest company seeking to capitalise on the economic momentum in the UAE, the Arab world's second-largest economy, and comes amid the continuing IPO boom in the country driven by growing investor demand.

It follows the listing of NMDC Energy, a unit of Abu Dhabi contractor National Marine Dredging Company, which began trading on the ADX after closing the biggest IPO in the Emirates this year.

The float, which was oversubscribed by more than 31 times, raised Dh3.22 billion ($871.9 million) through the sale of 23 per cent of the company's total share capital to retail and qualified institutional investors at Dh2.8 per share.

The NMDC Energy deal surpassed the $515 million raised by Alef Education in June but is smaller than healthcare operator Pure Health’s $986 million listing in December last year.

The list of potential IPOs is also growing. Delivery Hero, the Germany-based food delivery platform, announced in August that it is preparing to list shares of its UAE subsidiary Talabat on the Dubai bourse.

In June, UAE-based hospital operator NMC Healthcare also appointed Rothschild as a financial adviser to help explore strategic options for its shareholders, including an IPO.

Abu Dhabi’s LuLu Group International is also planning to launch its IPO this year and list its shares on the ADX, the region's second-largest bourse by market capitalisation. The hypermarket and chain operator has hired investment bank Moelis to advise it on the deal, a company representative told The National last year.

Etihad Airways, the UAE's flag carrier, is also preparing for a potential listing, which would be a first for a major Gulf airline as it pursues an ambitious growth strategy between now and 2030, its chief executive Antonoaldo Neves told The National in March.

The UAE, as well as the other members of the six-member economic bloc of the GCC, has seen a consistent rise in IPO activity over the past two years.

Saudi Arabia's Tadawul, the largest Arab bourse by market value, led in deal volume during the second quarter, with companies in the kingdom raising an aggregate of $1.6 billion, or 61 per cent, of the total IPO activity recorded during the period, according to PwC's quarterly IPO Watch report. Companies in the UAE also raised $890 million through IPOs during the April-June period.

Companies in Dubai alone raised Dh34.5 billion by selling shares in the past three years on the Dubai Financial Market, with the aggregate investor demand for those listings exceeding more than Dh1 trillion, the Dubai Securities and Exchange Higher Committee said in March.

The continued IPO activity in that period has helped the Dubai bourse maintain robust growth that pushed its general index to become the fifth-best performer globally last year, the committee said.

Dividend outlook

ADNH Catering, advised by Citigroup, First Abu Dhabi Bank, Emirates NBD Capital and Abu Dhabi Commercial Bank on the IPO, plans to pay a cash dividend of Dh60 million in April 2025 following the listing.

For the year ending December 31, 2025, the company intends to pay a total cash dividend of Dh180 million in two installments (expected in October 2025 and April 2026).

It further plans to increase the dividend for the following year (ending December 2026) by a "minimum of 5 per cent to reflect increased confidence in the group’s earnings and cashflow generation potential".

From January 1, 2027, ADNH Catering intends to adopt a dividend policy linked to the group’s financial performance and will continue paying cash dividends on a semi-annual basis.

M&A ambitions

The company operates across the health care, business and industry, defence, correctional, and education sectors and has approximately 160 on-site kitchens that serve more than 260 clients through 350 contracts, and delivers more than 11 million meals a month.

ADNH Catering, which generates about 90 per cent of its revenue from the UAE market, is optimistic about growth prospects in Saudi Arabia and plans to expand its business in the kingdom by about 10 per cent annually going forward, Mr Cowley told The National on Monday.

The company currently operates in Saudi Arabia through a joint venture with Compass Group and Al-Rushaid Petroleum Investment Company. ADNH Catering controls 30 per cent of the joint venture entity and is in talks with Saudi partners to increase its equity holding in the company.

"We're confident that we can improve our shareholding in that business, but also grow the business significantly," Mr Cowley said, adding that it is "premature" to say what will be the Abu Dhabi company's eventual stake in the Saudi joint venture.

"We have been in discussion for some time ... [and] certainly all the discussions are positive".

ADNH Catering is also open to acquiring stakes in smaller "complementary businesses" in the UAE to further expand its food and services business in country, Mr Cowley added.

Last year, the food services market in the UAE and Saudi Arabia was valued at $5.2 billion and is projected to grow to $6.8 billion by 2028. Of the total food services market, the ADNH Catering group's "addressable market was valued at $3.5 billion in 2023 and is projected to grow to $4.5 billion by 2028", the company said.

The company's food services include its Husk coffee grab-and-go business, which represented 59 per cent of the combined revenue for the year ended September 30, 2023. It also offers support services, including cleaning, housekeeping, pest control, laundry and the supply of manpower, drivers and other technical specialists, as well as procurement services for clients.

"The strong macroeconomic outlook is expected to underpin further growth in the food and support services markets in the UAE and Saudi Arabia," the company said.

"Further, growth in the food services markets in the UAE and Saudi Arabia is expected to be supported by government growth transformation agendas, including increasing population and immigration inflows."