Negotiations between Adnoc and Gunvor reach an impasse

The Abu Dhabi National Oil Company’s potential takeover of energy trading house Gunvor has reached an impasse amid a disagreement between the two sides over the scope of the deal, people familiar with the negotiations said.

While Adnoc had hoped to acquire all or a majority stake in Gunvor, the retailer’s CEO, Torbjörn Törnqvist, is unwilling to give up control of the group he co-founded in 2000, two people involved in the talks said.

Instead, Törnqvist, who controls almost 90 percent of Gunvor, has told Adnoc that he is only willing to sell a minority stake to raise funds for growth.

Such a deal would be less interesting for state-owned Adnoc, which is seeking control of the company to significantly boost its trade ambitions, one of the people said.

Adnoc established its own trading arm two years ago, and CEO Sultan Ahmed Al Jaber has often expressed a desire to improve profit margins by investing in refineries and trading capacity.

The deal would have been the biggest move by a Middle Eastern company into commodities trading. Although several Gulf states, including Saudi Arabia, have large national oil companies, they do not have large trading divisions, unlike European rivals Shell and BP.

Trading has been very profitable in recent years due to the huge volatility caused in energy markets first by the coronavirus pandemic and then by Russia’s all-out invasion of Ukraine.

Adnoc and Gunvor have been in talks since last summer and have extended an exclusivity clause until the end of March to get a deal through the line.

Adnoc and Gunvor both declined to comment.

People close to the talks gave mixed reports on whether further talks are possible, with one suggesting an even smaller deal could be struck. Others said Adnoc is effectively withdrawing from the discussions. But they agreed that a major deal for a majority stake in the company was now highly unlikely.

Headquartered in Geneva and based in Cyprus, Gunvor is one of the world’s largest independent energy traders, moving around 240 million tonnes of commodities including oil, gas and coal in 2021.

Founded by Törnqvist together with Russian businessman Gennady Timchenko in 2000, the company was initially known for its close ties to Russian energy producers.

In 2014, just before he came under US sanctions for his ties to Russian President Vladimir Putin following the annexation of Crimea, Timchenko sold his stake in the company to Törnqvist. The company has reduced its volumes of raw materials of Russian origin in recent years.

Törnqvist was keen to keep his majority stake, according to people close to the company. Previous talks with potential investors, including Algerian-based Sonatrach, and informal talks with rival trading house Mercuria have not been successful.