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January 18, 2024 - Saudi Tadawul Group Holding Company (STG) has entered into a definitive agreement to acquire a 32.6% shareholding in DME Holdings Limited, the parent company of Dubai Mercantile Exchange (DME). Upon completion of this agreement, Saudi Tadawul Group will become a joint major shareholder with CME Group. DME will rebrand as the Gulf Mercantile Exchange, which will act as the primary commodities exchange in the Middle East with a global scope.
With this transaction, Saudi Tadawul Group joins other prestigious shareholders, including the Oman Investment Authority and Dubai Holding, as well as global financial and industry leaders. The new shares acquired will be used to fund DME's growth, and STG also holds the option to further increase its shareholding in the future.
The investment by STG is set to accelerate DME's potential as a regional commodities leader, with DME acting as a strategic bridge connecting production hubs and end-markets. This partnership is expected to bolster the energy, metals, and agricultural commodity markets, supporting the global shift towards a sustainable economy.
DME, headquartered in the UAE, operates the DME Oman Crude Oil Futures Contract, the world's largest physically delivered crude oil contract and the third-most important crude oil benchmark globally. DME OQD Contract physical delivery volumes reached 210 million barrels of oil in 2023, up from 181 million in 2022. 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.
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 integrity and regulatory framework of DME and its products, including oversight by the Dubai Financial Services Authority (DFSA) and clearing through CME Clearing, regulated by the U.S. Commodity Futures Trading Commission (CFTC), remain unchanged under this agreement.
Ahmad Sharaf, Chairman of DME Holdings Limited, shared his thoughts in welcoming STG as a joint major shareholder, stating that this investment highlights the growth opportunities for the Gulf Mercantile Exchange, ""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.
"As we enter a new era of growth as the Gulf Mercantile Exchange, we are excited about the potential to build a regional commodities powerhouse with global relevance. Not only will our expanded partnership support our flagship Oman Crude Oil Contract but it will also position us to become a champion for the transition to a more sustainable future."
Eng. Khalid Al Hussan, Group CEO of Saudi Tadawul Group, said, ""Our investment in DME Holdings Limited provides Saudi Tadawul Group with access to one of the most important asset classes globally for the first time, embedding commodities trading into 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 revenues and opportunities and is firmly aligned with our growth strategy and ambitions as part of Vision 2030. We look forward to working together to unlock new growth opportunities, leveraging our proximity to key financial and production hubs to bridge demand from east and west."
Mulham Al Jarf, Deputy President for Investments, Oman Investment Authority, said, "We are delighted to welcome Saudi Tadawul Group as a new shareholder. Its expertise and insights, along with what we have built over the years with DME Holdings Limited in Dubai Mercantile Exchange, will be invaluable as we continue to navigate through an ever-evolving market landscape. This partnership marks a significant step in our commitment to innovation and excellence in providing opportunities for DME's regional and global stakeholders while maintaining the integrity of DME Oman."
Derek Sammann, Senior Managing Director, Global Head of Commodities, Options and International Markets, CME Group, added, "We look forward to welcoming Saudi Tadawul Group as a significant partner in the new Gulf Mercantile Exchange, the premier commodities exchange in the MENA region. Building on DME's successful benchmark Omani Crude Oil futures contract, Saudi Tadawul Group's participation in the exchange will unlock new opportunities for developing regionally relevant trading products to help global market participants gain exposure or manage energy, metals or agriculture price risk."
The transaction is subject to customary closing conditions and regulatory approvals. Once completed, DME will continue operations from its Dubai International Financial Centre (DIFC) headquarters, regulated by the DFSA, with CME Group continuing to provide trading technology and clearing services, overseen by the CFTC.
