Thursday, September 04, 2008

Abu Dhabi Starts $1 Billion `Imagenation' Film Unit

Original Article

Sept. 3 (Bloomberg) -- Abu Dhabi, after investing billions of dollars of oil wealth in Citigroup Inc. and Ferrari SpA, now plans to spend $1 billion over five years to finance Hollywood and international films.

Government-owned Abu Dhabi Media Co. formed Imagenation Abu Dhabi to work with producers to make as many as eight films a year, according to a statement today from Abu Dhabi Media, whose assets also include Holy Quran Radio.

Abu Dhabi, which holds most of the oil and gas reserves of the United Arab Emirates, is using record energy revenue to establish itself as an international investor. The ruling family paid 114 million euros ($164 million) in 2005 for a Ferrari stake, and the government invested $7.5 billion in Citigroup in November. An Abu Dhabi investment firm this week agreed to buy the U.K.'s Manchester City soccer club.

``Investing in content creation is a good place to be even though it can be a high-risk business,'' said Paul Gooden, who follows media companies for ABN Amro Bank NV in London. ``That's why having a portfolio approach is a sensible strategy and the issue is about diversification of risk. Abu Dhabi now is a one- trick pony, which is oil.''

Abu Dhabi is stepping in as other sources of movie funding dry up amid the credit crunch. Viacom Inc.'s Paramount Pictures and Deutsche Bank AG scrapped plans in July to raise $450 million for film production after failing to find investors, two people with knowledge of the plans said at the time. Deutsche Bank closed its unit dedicated to film finance, a person with knowledge of the plan said.

Merrill's Decision

Merrill Lynch & Co. reduced film financing in May, when Michael Blum, who led divisions that packaged mortgage bonds and raised money for Hollywood films, left the company, people familiar with the matter said at the time.

``Our target output of eight films every year will make Imagenation Abu Dhabi one of the world's top producers of feature films and establish Abu Dhabi as a leading center for content creation,'' Ed Borgerding, chief executive officer of Abu Dhabi Media and Imagenation, said in the statement.

Abu Dhabi's investments in media and culture are helping it to diversify away from oil and gas. The sheikhdom, one of seven that make up the United Arab Emirates, is spending $40 billion to develop Yas Island, which will host the world's first Ferrari theme park, and a cultural district on Saadiyat Island that will include the Louvre Abu Dhabi and a new Guggenheim Museum, designed by Frank Gehry.

Oil's Surge

Based on the average crude price and Abu Dhabi's daily output, the emirate has reaped $98.5 billion in oil sales in the past year. Oil prices have risen about three and a half fold over the past five years, while gas is up more than 50 percent. Hydrocarbons as a percentage of gross domestic product fell to 60.3 percent last year from 60.8 percent in 2006 even as crude prices increased 9.2 percent, according to the department of economy and planning.

Sovereign wealth funds from Dubai to Singapore are taking advantage of a stock-market slump that erased about $10 trillion in market value and a three-year decline in the dollar to invest their cash. The Qatar Investment Authority bought shares in Barclays Bank Plc in July, while Singapore's Temasek raised its stake in Merrill last month after the firm posted the biggest quarterly loss in its 93-year history.

Disney Veteran

In March, Abu Dhabi Media hired Borgerding, a former executive vice president at Walt Disney Co. in Hong Kong, where he oversaw the company's Asia-Pacific units.

The emirate also plans to build theme parks with companies including Time Warner Inc. and MGM Mirage. Abu Dhabi Media's parent company, Mubadala Development Co., is paying for MGM to build a $3 billion hotel and entertainment complex in Abu Dhabi as part of a joint venture they formed in 2006 to develop non- gaming hotels and resorts in the U.A.E., Las Vegas and the U.K.

Time Warner said last year it will build a theme park, hotel, cinemas and a movie studio in Abu Dhabi with local developer Aldar Properties PJSC.

In November, the state-owned Abu Dhabi Investment Authority invested in Citigroup, the biggest U.S. bank by assets, after record mortgage losses. The authority is the largest sovereign wealth fund in the world with some $1 trillion under management. Mubadala bought 5 percent of Ferrari from Mediobanca SpA, Italy's largest investment bank.

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