Tuesday, July 22, 2008

G.E. Partners With Abu Dhabi Fund

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Hoping to tap into higher returns overseas, the General Electric Company said Tuesday that it would partner with a sovereign wealth fund in Abu Dhabi to create an $8 billion commercial finance fund based in the Middle East.

The fund, Mubadala Development Company, and G.E. said Tuesday that they had agreed to each invest a total of $4 billion in equity into the fund over the next three years.

Additionally, Mubadala said it planned to become a major stockholder of G.E. by buying shares through the open market.

“This partnership brings together two world-class organizations with complementary resources and a shared commitment to excellence,” Jeffrey R. Immelt, G.E.’s chief executive, said in a statement. “Mubadala has deep experience, a diversified portfolio of businesses, access to regional infrastructure opportunities and an exciting vision for growth.”

The companies also plan to develop a research center for clean energy and water, and expand G.E.’s aircraft maintenance and repair service in the Middle East.Mubadala said it intended to invest up to $200 million in GE Industrial Investment Partners, a new partnership of global investors that will provide capital to health care, energy and transportation companies. G.E. said it would commit up to $50 million to investments in clean technology firms.

Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisers, said the announcement came as a surprise, but added that it was a smart move for G.E.

“Politically, the Middle East is a difficult part of the world for an American company to operate in,” he said. “In one stroke, G.E. eased through a lot of hurdles. To partner up with someone who can ameliorate those political issues was a very creative solution.”

The companies, which have been working together for more than four years, already manage an infrastructure fund that invests in projects in the Middle East.

G.E. said its 2007 revenue in the Middle East totaled more than $5 billion, an increase of 50 percent from the previous year. It said it expects revenue in the region to reach about $9 billion by 2010.

Shares of G.E., which have lost nearly a third of their value in the last year, were up about 2 percent, to $28.31 in afternoon trading.

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