Saudi Tadawul Group Holding Company (STG), a leading diversified capital markets group in the MENA region, has entered into a binding agreement with the existing shareholders of DME Holdings Limited to acquire a 32.6% stake in the Dubai Mercantile Exchange (DME), one of the leading international commodity exchanges.
As a result, Saudi Tadawul Group will become the joint largest shareholder of DME Holdings Limited along with CME Group, with other shareholders including Oman Investment Authority and Dubai Holding as well as global financial and trading industry leaders. The Agreement also includes the option for STG to increase its participation in the future. The shares acquired represent a mix of new and existing shares, with proceeds from the new shares being used to fund DME’s growth.
STG’s investment represents a significant opportunity to leverage world-class capabilities and expertise, accelerating DME’s growth as a regional commodity leader well-positioned to meet global commodity demand. The Agreement will support a strategic move towards leveraging the Middle East’s geographical proximity to both key commodity production hubs and end markets, with DME acting as a bridge between production and end markets.
The partnership will enable the new Gulf Commodity Exchange to meet demand for energy, metals and agricultural commodity markets and support the ongoing global transition to a sustainable economy through the launch of next-generation derivatives contracts as part of the transition to a sustainable economy.
Founded in 2007, DME is based in the United Arab Emirates and hosts the DME Oman crude oil futures contract (DME Oman), which produces the largest amount of crude oil delivered in the world. The DME Oman contract serves as the world’s third most important crude oil benchmark, used by five national oil companies based in the Gulf Cooperation Council countries. DME and the DME Oman contract operate in accordance with the highest standards of international financial regulation.
Under the terms of the agreement, ensuring the integrity of the DME Oman contract is of particular importance to all parties. Accordingly, it is agreed that no changes to any aspect of the DME Oman Contract will result from the transaction contemplated by the Agreement. In addition, to avoid conflicts of interest and to preserve the twin imperatives of neutrality and price discovery, no Saudi crude oil contract will be traded, sold or bought or indexed, nor will crude oil be delivered of Saudi Arabia against the DME Oman contract through DME.
The transaction is subject to closing conditions, including regulatory approvals. Following the completion of the Saudi Tadawul Group’s investment, DME will continue to operate as usual from its headquarters in the Dubai International Financial Center (DIFC) and will remain regulated by the Dubai Financial Services Authority. CME Group will continue to provide the industry-leading CME Globex trading technology and clearing services to the Gulf Mercantile Exchange.
Ahmad Sharaf, Chairman of DME Holdings Limited, said:
“On behalf of DME Holdings Limited and its shareholders, I am pleased to welcome the Saudi Tadawul Group as a joint majority shareholder. In particular, I am proud that the Saudi Tadawul Group has chosen to enter the global commodity market through its investment in DME Holdings Limited and this reflects both the Dubai Mercantile Exchange’s established position as one of the world’s leading energy-focused commodity exchanges and the opportunities for growth open to the Dubai Commodity Exchange.
Eng. Khalid Al Hussan, CEO of Saudi Tadawul Group, said:
“Our investment in DME Holdings Limited gives the Saudi Tadawul Group access to one of the world’s most important asset classes for the first time, integrating commodities traded on the Middle East’s largest capital markets group. With the option to increase our stake in the future, this investment will contribute to our ability to diversify the Group’s revenue and opportunities and is firmly aligned with our growth strategy and ambitions as part of Vision 2030. We look forward to working together to to unlock new growth opportunities, leveraging our proximity to key financial and manufacturing hubs to bridge demand from east and west.”