Saudi Tadawul Group Holding Company (STG), a diversified capital markets group in the MENA region, has entered into a binding agreement with existing shareholders of DME Holdings Limited in order to “acquire a 32.6% stake in Dubai Mercantile Exchange (DME), one of the leading international commodities exchanges (the Agreement).”
As a result, Saudi Tadawul Group will reportedly “become the joint largest shareholder in DME Holdings Limited alongside CME Group, with other shareholders including the Oman Investment Authority and Dubai Holding as well as global financial and commercial industry leaders.”
The Agreement also includes “an ability for STG to increase its shareholding in the future.”
The shares acquired represent “a mix of new and existing shares, with the proceeds from the new shares 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 commodities leader that is well-positioned to capture global commodities demand.”
The Agreement will support a strategic move “towards leveraging the Middle East’s geographic proximity to both key commodity production hubs and end-markets, with DME serving as a bridge between production and end-markets.”
The partnership will enable the new Gulf Mercantile Exchange “to capture 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 and headquartered in the UAE, DME is home to “the DME Oman Crude Oil Futures Contract (DME Oman), that 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, which is used by five national oil companies based in the Gulf Cooperation Council countries. DME and the DME Oman contract operate to the highest standards of international financial regulation.”
Its use is authorized by “the Dubai Financial Services Authority (DFSA) and all trades executed on DME are cleared through CME Clearing, which is regulated by the U.S. Commodity Futures Trading Commission (CFTC).”
Under the terms of the Agreement, “ensuring the integrity of the DME Oman contract has been of particular importance to all parties. As such, it has been agreed that no changes to any aspects of the DME Oman contract will result from the transaction contemplated by the Agreement.”
In addition, to avoid conflict of interest and “safeguard the twin imperatives of neutrality and price discovery, no Saudi Arabian crude oil contract will be traded, sold or bought on, or indexed to, nor will Saudi crude be delivered against, the DME Oman contract via DME.”
The transaction is subject to closing conditions, “including as to regulatory approvals. Following the completion of Saudi Tadawul Group’s investment, DME will continue to operate as usual from its headquarters in Dubai International Financial Centre (DIFC) and will remain regulated by the Dubai Financial Services Authority.”
CME Group will continue to “provide its CME Globex trading technology and clearing services to Gulf Mercantile Exchange.”
The CFTC’s role in “overseeing CME Clearing’s operations to protect the integrity of transactions executed on the DME and mitigating risk to traders will remain unchanged.”
Ahmad Sharaf, Chairman of DME Holdings Limited, said:
“On behalf of DME Holdings Limited and its shareholders, I am delighted to welcome Saudi Tadawul Group as joint largest shareholder. In particular, I am proud that Saudi Tadawul Group has chosen to enter the global commodities market through its investment in DME Holdings Limited and this reflects both Dubai Mercantile Exchange’s established position as one of the world’s leading energy-focused commodities exchanges and the opportunities for growth open to Dubai Mercantile Exchange.