Tadawul Group inks SPA worth SAR 107M to acquire 32.6% stake in DME Holdings

Logo of Saudi Tadawul Group Holding Co.

Saudi Tadawul Group Holding Co. (Tadawul Group) signed a binding sale and purchase agreement (SPA) with DME Holdings Ltd. and the latter’s current shareholders (namely Eagle Commodities Ltd., New York Mercantile Exchange Inc. (NYMEX) and Tatweer Dubai LLC.) to acquire a 32.6% stake in DME Holdings, according to a statement to Tadawul.

The group will also invest about SAR 107 million ($28.5 million) by acquiring 32.6% stake in DME Holdings, representing a combination of new and existing shares.

NYMEX is owned by CME Group (CME), while Tatweer is owned by Dubai Holding. Meanwhile, Eagle Commodities is owned by the Oman Investment Authority.

As a result of the proposed transaction, Tadawul Group will invest indirectly in Dubai Mercantile Exchange Ltd., which is owned by DME Holdings and regulated by the Dubai Financial Services Authority (DFSA). In addition, the group will become the joint largest shareholder in DME Holdings alongside CME.

The SPA is subject to a number of pre-closing terms and conditions, including obtaining the relevant regulatory approvals outside the Kingdom amongst other regulatory and commercial conditions. In addition, it is subject to the terms of completing the final structuring of the proposed transaction.

Under the agreement, Tadawul Group can obtain majority control over DME Holdings after the fourth year during a predetermined period. In addition, the agreement enables DME Holdings’ current shareholders to offer their shares to the group after four years within a certain period.

Furthermore, as part of the proposed transaction terms, Dubai Mercantile Exchange will rebrand to the “Gulf Mercantile Exchange" to reflect its position as a regional commodities exchange with global relevance, Tadawul Group said.

The SPA will be financed from Shariah-compliant bank loans. It represents a significant opportunity to leverage world-class capabilities and expertise, accelerating DME Holdings’ growth as a regional commodities leader that is well-positioned to capture global industry-related demand.

It aligns with Tadawul Group’s growth strategy and ambitions, contributing to its diversification as part of its strategic plan. The partnership will unlock further opportunities in the energy, metals, and agricultural commodity markets and support the ongoing transition to a sustainable economy through the launch of next-generation derivative contracts.

The proposed transaction will also enable the group to realize the third pillar of its strategy and contribute to revenue growth and diversification, with an expected positive financial impact in the long term, according to the statement.

Following the completion of the group’s potential acquisition, DME Holdings will continue to operate as usual from its headquarters in the Dubai International Financial Centre (DIFC) and will remain regulated by the DFSA.

Tadawul Group will become the joint largest shareholder in DME Holdings, alongside CME and other shareholders including the Oman Investment Authority and Dubai Holding as well as global financial and commercial industry leaders, the statement added.

CME will continue to provide its industry-leading trading technology and clearing services to DME.

The group also noted that no Saudi crude oil contract will be traded, sold or bought on, or indexed to, nor will Saudi crude be delivered against, the Oman Crude Oil Futures Contract (DME Oman Contract) via DME Holdings.

The group appointed Rothschild & Co. as financial advisor on the proposed transaction. In addition, AS&H Clifford Chance will act as legal advisor, while Deloitte Middle East was named as financial, tax due diligence and accounting advisor.

Dubai Mercantile Exchange was founded in 2007. It is headquartered in DIFC and regulated by DFSA in the UAE. It is the premier energy-focused commodities exchange for markets located east of the Suez Canal and the home of the DME Oman Contract. It generates the world’s largest amount of physically delivered crude oil. The DME Oman Contract serves as the third-most important crude oil benchmark globally.

Through Omani crude oil contracts on the Dubai Mercantile Exchange, physical delivery volumes reached 210 million barrels of oil in 2023, compared to 181 million barrels in 2022.

A total of 20 billion barrels of Omani crude oil has been traded on the Dubai Mercantile Exchange since its launch in June 2007. Meanwhile, three billion barrels have been delivered via its physical delivery mechanism over the same period.

All trades executed on the Dubai Mercantile Exchange are cleared through CME Clearing, which is regulated by the US Commodity Futures Trading Commission (CFTC).