Tuesday, July 22, 2008

Abu Dhabi vehicle aims to join top GE shareholders

Mubadala, Abu Dhabi’s increasingly powerful state investment vehicle, said on Tuesday it planned to become one of the 10 biggest institutional investors in General Electric as it announced a series of deals with the US group, including a $8bn joint venture to set up a commercial finance business.

The move highlights the growing self-confidence and ambitions of Abu Dhabi’s sovereign investment vehicles as the emirate seeks to utilise its immense oil wealth to diversify its economy and broaden its portfolio of investments.

It also highlights how western companies are seeking to tap into the boom in the Arabian Gulf, fuelled by record oil prices. GE has been striving to deepen its ties in the Middle East, and its stock has lost nearly a quarter of its value this year as the group’s results have been hit by the financial turmoil and the slowing economy in the US.

Included in the deals are plans for the two companies to launch a financial services business that will be based in Abu Dhabi – the capital of the United Arab Emirates – with each investing $4bn over three years. The new entity, which will be established during the next year and modelled on GE Capital, will aim to build up its assets to more than $40bn over the next 12-18 months, investing in sectors such as infrastructure and real estate.

Set up in 2002 to build new businesses in Abu Dhabi, Mubadala’s highest-profile deals include the acquisition of a 5 per cent stake in Ferrari and 7.5 per cent of Carlyle Group. It also recently announced ventures with EADS and Rolls Royce.

Mubadala currently holds no shares in GE but will begin building its position over the next few months from the open market, said Khaldoon Al Mubarak, Mubadala’s chief executive.

He told the Financial Times that the announcement that the company wanted to be a top 10 shareholder in GE “over time” was intended to ensure transparency and avoid any “potential issues”. At today’s share prices, Mubadala would have to pay $3.4bn for a 1.2 per cent stake to be one of the 10 biggest shareholders.

Jeff Immelt, GE’s chief executive, said the group would welcome a long-term strategic investor.

Last year, GE’s revenues in the region were more than $5bn, an increase of 50 per cent compared to 2006.

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