Abu Dhabi National Oil Co. (Adnoc) is currently in talks with advisors regarding a potential investment in UGI Corp.’s propane distribution unit, AmeriGas. The state-owned company is considering purchasing a stake in the company, with the possibility of valuing it at several billion US dollars. If Adnoc decides to move forward with the transaction, it would be their first major acquisition in the US as they seek to diversify their operations beyond crude oil.
While discussions are still 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 the assistance of 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 and has an international presence in propane distribution in Europe.
Adnoc’s exploration of potential investments in UGI Corp.’s propane distribution unit comes as part of their efforts to diversify their operations beyond crude oil as they anticipate declining demand for fossil fuels due to energy transition efforts worldwide.
As one of the largest producers of oil and gas globally, Adnoc recognizes the need to adapt its business model if it wants to remain competitive long-term.
The potential purchase by Adnoc could represent a significant opportunity for both companies involved if it can be successfully executed.