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Abu Dhabi National Oil Company and Gunvor are in talks to acquire all or part of the trading company, a deal that will significantly increase the United Arab Emirates’ influence in global commodity markets.
Talks are at an early stage and a deal may not be reached, according to two people familiar with the matter. However, any investment in Gunvor would be in line with the UAE state-owned oil producer’s strategy to diversify its revenue streams and expand its trading sector.
Gunvor CEO Torbjörn Törnqvist, who controls nearly 90 percent of the company, has been considering selling the company for some time.he holds unsuccessful talks It partnered with Algeria state-backed energy company Sonatrach in 2019 and has discussed potential partnerships with other trading firms in the past, according to people familiar with the matter.
He told a Financial Times conference in March that he would consider selling some of the company’s stake to help fund its growth.
“For us, I should say, to really develop the potential of the company, to explore additional equity is desirable,” he said. “We’re open to looking for alliances that can scale the company.”
He added: “It has to add something — it could be adding capital . . . or you can find some other strategic relationship, people that add another dimension to the business itself.”
Adnoc launched its own trading unit two years ago, and chief executive Sultan Ahmed Al Jaber has often expressed a desire to boost profit margins by investing in refining and trading capabilities.
Jaber told the Financial Times Last year, he hoped to “increase the value of a barrel of oil” and help the UAE diversify into future economic growth.
Both Adnoc and Gunvor declined to comment on the talks first reported by Bloomberg.
Founded in 2000 by Törnqvist and Russian businessman Gennady Timchenko, Gunvor is one of a handful of large independent commodity traders, including Trafigura, Vitol and Mercuria, that play an important role in the global energy trade, acting as a middleman and infrastructure operators such as terminals and refineries.
Last year Gunvor’s volumes rose by 25% to 240 million tonnes, with a net profit of $726 million and a turnover of $135 billion.It got off to a stronger start to the year with a net profit of $841 million First six months of 2022Boosted by wild swings in oil and gas markets following Russia’s invasion of Ukraine.
In 2014, shortly before Timchenko took office sanctioned The Russian trader, who has since left the company after selling his stake to Törnqvist, has been charged by the U.S. government over its alleged ties to President Vladimir Putin.
In 2016, Törnqvist paid itself a special dividend of $1 billion to repay a debt owed to Timchenko for the abrupt sale of its co-founder’s stake two years earlier.
While the company’s roots lie in Russian oil trading, it has diversified in recent years and is one of the world’s largest LNG traders. Over the past five years, goods originating in Russia have accounted for only 6-11% of Gunvor’s trade activity.
Gunvor, however, has faced some financial pressure from surging margin calls related to market volatility, even though it has generated huge profits.
The company trimmed its trading positions last fall after soaring gasoline prices sparked a need for extra cash to cover hedged positions at brokers and exchanges, but it has since strengthened its credit lines.
“Scale matters [in commodity trading],” Törnqvist told the Financial Times in March. “If you’re a small player, it’s going to be very difficult going forward. “
Additional reporting by Harry Dempsey and Arash Massoudi in London
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