Multinational fuel and convenience retailer Abu Dhabi National Oil Co (Adnoc Distribution) intends to acquire 100% of the share capital of integrated energy and petrochemical company Shell Downstream South Africa for $1-billion.

This marks a significant step towards Adnoc Distribution’s drive to become a global mobility and convenience retailer, while advancing its fuel retail footprint in Africa.

Adnoc Distribution expects the acquisition to boost its earnings a share by 6% in the first full year after deal completion and generate an internal rate of return in excess of the company’s minimum rate of return to deliver immediate shareholder value.

The company hopes to build on its current record of international expansions in Egypt and Saudi Arabia, and aims to contribute positively to South Africa’s economy.

Following the completion of the proposed acquisition, a 28% stake in Shell Downstream South Africa is expected to be sold to a local empowerment partner alongside an employee stock option plan.

Further, Adnoc Distribution will enter into a long-term brand licensing agreement following the completion of the proposed acquisition to retain the Shell brand for retail service stations and the lubricants business in South Africa.

“The proposed acquisition marks a significant milestone in Adnoc Distribution’s international growth strategy and reflects our 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.

“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,” says Adnoc Distribution CEO Bader Al Lamki.

Adnoc Distribution also notes that the South African fuel retail sector offers attractive fundamentals such as critical transport infrastructure, a growing driving-age population, a strong and transparent regulatory framework for fuel retail and pricing structures designed to insulate margins against inflation and currency volatility.

Together, the company concludes, these features will help create a compelling environment for sustainable growth, consistent performance and cash generation, thereby supporting long-term value creation for shareholders.