Abu Dhabi National Oil Co. (Adnoc) is currently considering a potential investment in UGI Corp.’s propane distribution unit, AmeriGas. Sources close to the matter say that Adnoc is in talks with advisors about the possibility of purchasing a stake in the company, valuing it at several billion US dollars. If the transaction goes ahead, Adnoc Distribution, the company’s listed retail arm, would be used to make the investment. This would be Adnoc’s first major acquisition outside of crude oil as they look to diversify their operations.
While discussions are ongoing, there is no guarantee that a deal will be reached. Adnoc declined to comment on the matter and UGI has not responded to requests for comment. Following reports of Adnoc’s interest in a potential deal, UGI’s stock saw a significant increase of 6.4% in New York trading. The company, headquartered in King of Prussia, Pennsylvania, had previously announced in August that it was exploring strategic alternatives with Goldman Sachs Group Inc. and JPMorgan Chase & Co., focusing on its liquefied petroleum gas business.
In 2019, UGI agreed to acquire the remaining shares of AmeriGas for $2.4 billion, valuing the propane distributor at approximately $3.3 billion. Like other Middle Eastern companies, Adnoc is looking to expand its operations amidst expectations of declining crude oil demand in the energy transition phase. Alongside potential investments in AmeriGas, Adnoc has also been in talks with German chemical company Covestro AG. UGI operates not only its propane distribution business but also natural gas distribution and electric utilities with an international presence in propane distribution in Europe as well.
The potential acquisition by Adnoc could be seen as a strategic move for both companies as they navigate through the changing energy landscape towards more sustainable sources of energy production and consumption.
As of now there is no news about any final decision made by adnoc or ugi but it will definitely impact both companies if it happens.
