East Gas Company (EGC) has filed to sell a 20% stake in the company via a private placement on Tadawul’s parallel market Nomu, according to two disclosures to Tadawul (here and here). The private placement is a precursor to the company’s plan to stage a full-fledged IPO on Nomu. There’s no publicly available information about whether the company has or is going to conduct a fair value study ahead of the private placement, or on the timeline of the potential transaction.

The rationale: The potential private placement likely aims at meeting one of the requirementsfor debuting on Nomu, which is to have a minimum of 50 public shareholders. EGC currently has a market cap of SAR 80 mn — that’s SAR 70 mn more than the minimum requirement to execute an initial public offering on Nomu.

SOUND SMART- What’s a private placement? It’s a method of raising capital by selling shares directly to a select group of investors, rather than through a public offering. Companies use private placements to quickly raise funds with fewer regulatory requirements and less disclosure compared to public offerings. This approach allows for more tailored investment terms and often accelerates the funding process.

About EGC: EGC acquires natural gas from Saudi Aramco and delivers it to over 45 industrial clients through its 44 km pipeline network in Dammam Second Industrial City, home to more than 300 factories. The company is extending its pipeline network to accommodate increasing energy needs and utilizes a 52 km fiber optic network to connect all customers to its SCADA system, enabling real-time monitoring of gas metering and regulation.

Who owns EGC? The natural gas company is formed by a consortium of five companies: National Gas & Industrial Company owns a 35% stake, Saudi Paper Group holds 26%, Arab Paper Manufacturing Company holds 23%, Saudi Arabian Amiantit Company holds 13%, and Rabiah and Nassar Group holds 3%.

ADVISORS- Arbah Capital is acting as sole financial advisor on the transaction.

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