In This Article
30-Second Summary
Headline Links: The United Arab Emirates raises its financial stakes in the West
Background: Abu Dhabi and Dubai’s state investment arms
Reactions: ‘An exciting time’
Opinion & Analysis: The power of sovereign funds
Reference Material: Investing at the source
Related Topics: The UAE’s Foreign investment interests
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Sony Sells Sizeable Stake to Dubai State Investment Fund
by
findingDulcinea Staff
Dubai International Capital’s move boosts Sony’s shares; the purchase is the latest by United Arab Emirates in a series of investments in international holdings.
30-Second Summary
Dubai International Capital (DIC), a sovereign investment fund owned by Sheikh Mohamed bin Rashid al-Maktoum, the ruler of Dubai, bought a 1 percent stake in Japanese technology manufacturer Sony on Nov. 26.
This purchase, worth an estimated $500 million, pushed up Sony’s stock by 4.6 percent on the Tokyo stock exchange, the Nikkei.
The Sony transaction is the most recent in a spending rush powered by Gulf-based capital. The DIC also recently added British hotel chain Travelodge and U.S. hedge fund Och-Ziff Management to its portfolio and is planning to back a Virgin buy-up of shares of beleaguered U.K. mortgage broker Northern Rock.
The UAE firm has spent more than $10 billion since its inception in 2004. Of the region’s booming fortunes, the Washington Post writes, “Much of the wealth of the United Arab Emirates comes from oil. As these countries’ proven oil reserves are depleted, their rulers are seeking to invest oil income in other industries to ensure their financial future.”
Fellow emirate Abu Dhabi has also followed the spending trend. Its state investment arm, Mubadala Development Corporation, recently spent $622 million for a stake in U.S.-based Advanced Micro Devices, as well as a 7.5-percent stake in investment bank the Carlyle Group.
Some $37 billion has been invested in Western financial institutions by government-run funds based in the Middle East and China.
“Bankers say there is a big appetite among wealth funds for further investment in financial assets hit by the credit market turmoil,” said the Financial Times.
This purchase, worth an estimated $500 million, pushed up Sony’s stock by 4.6 percent on the Tokyo stock exchange, the Nikkei.
The Sony transaction is the most recent in a spending rush powered by Gulf-based capital. The DIC also recently added British hotel chain Travelodge and U.S. hedge fund Och-Ziff Management to its portfolio and is planning to back a Virgin buy-up of shares of beleaguered U.K. mortgage broker Northern Rock.
The UAE firm has spent more than $10 billion since its inception in 2004. Of the region’s booming fortunes, the Washington Post writes, “Much of the wealth of the United Arab Emirates comes from oil. As these countries’ proven oil reserves are depleted, their rulers are seeking to invest oil income in other industries to ensure their financial future.”
Fellow emirate Abu Dhabi has also followed the spending trend. Its state investment arm, Mubadala Development Corporation, recently spent $622 million for a stake in U.S.-based Advanced Micro Devices, as well as a 7.5-percent stake in investment bank the Carlyle Group.
Some $37 billion has been invested in Western financial institutions by government-run funds based in the Middle East and China.
“Bankers say there is a big appetite among wealth funds for further investment in financial assets hit by the credit market turmoil,” said the Financial Times.
Headline Links: The United Arab Emirates raises its financial stakes in the West
On Nov. 26, Dubai International Capital (DIC), the fund manager responsible for some $13 billion, announced that it had bought a 1 percent share of Japanese technology manufacturer Sony worth an estimated $500 million. This is the latest addition to the DIC’s portfolio, which includes shares in European Aeronautic, HSBC Holdings and U.K.-based hotel chain Travelodge. As a result, Sony’s stock rose 4.6 percent on the Nikkei. DIC has spent over $10 billion on foreign investment since the company’s launch, using funds earned from a boom in Dubai real estate and state-run firms such as Emirates Airline and port operator DP World. In October, the DIC bought a stake worth $1.26 billion in Och-Ziff Capital Management, a New York-based hedge fund. In the United Kingdom, DIC plans to back billionaire Sir Richard Branson’s proposal to buy mortgage lender Northern Rock.
Source: Bloomberg
The Japan-based manufacturer Sony has been selling off subsidiaries not directly related to its core activities, a strategy that created an opening for the DIC purchase. Technology is the latest sector to get a shot of capital from the Gulf region, which is riding a wave of petrodollars as oil prices reach all-time highs. The Washington Post writes, “Much of the wealth of the United Arab Emirates comes from oil. As these countries’ proven oil reserves are depleted, their rulers are seeking to invest oil income in other industries to ensure their financial future.” Another United Arab Emirates-based sovereign fund, Mubadala Development, paid $622 million for a stake in semiconductor manufacturer Advanced Micro Devices. Mubadala is owned by the emirate of Abu Dhabi, and Dubai International Capital is a subsidiary of Dubai Holding, which is 99.67 percent owned by Sheik Mohammed bin Rashid al-Maktoum, the ruler of Dubai.
Source: Washington Post
Background: Abu Dhabi and Dubai’s state investment arms
Mubadala Development Company is the investment and development arm of Abu Dhabi and is chaired by Mohammed bin Zayed al-Nahyan, the crown prince of Abu Dhabi. The CEO is Khaldoon Mubarak. The company has a diversified portfolio, including investments in the energy, heavy industrial, telecommunications and aerospace industries throughout the Middle East and in Nigeria, Switzerland, Italy and the Netherlands. It is also branching into the American banking sector. One of Mubadala’s most important companies is Dolphin Energy, one of the largest gas producers in the region.
Source: Zawya (registration required)
Dubai International Capital is the investment concern of Dubai Holding, a large conglomerate almost completely owned by Sheikh Mohammed bin Rashid al-Maktoum, the ruler of Dubai. Financial news service Zawya compiled a list of DIC’s holdings and financial interests.
Source: Zawya (registration required)
Reactions: ‘An exciting time’
On Nov. 29, Dubai Holding subsidiary Dubai International Capital (DIC) announced the establishment of an advisory board to administer its $2 billion global securities fund in light of its Sony share purchase. The board will be headed by DIC executive chairman Sameer al-Ansari, and will include among its members Sony advisory board chairman Nobuyuhi Idei and Helmut Pank, former chief executive and chairman of BMW’s management board. “These appointments come at an exciting time, which has made substantial investments this year, and has further large investments planned,” said al-Ansari.
Source: Market Watch
CNN’s John Defterios flew to Abu Dhabi and met with Mubadala head Khaldoon Mubarak after the firm bought a 7.5 percent stake in the Carlyle Group, a U.S.-based investment bank. Mubarak said of the purchase, “If you look at the areas Carlyle has focused on—aerospace, energy, power, infrastructure, transportation, healthcare—these are all areas you find Mubadala very aggressively acting in. And the synergies that we see, the potential partnerships that can be created through this investment are endless.”
Source: CNN
Opinion & Analysis: The power of sovereign funds
According to a report from the International Institute of Finance (IIF), the six member states of the Gulf Cooperation Council (GCC), a regional economic trading bloc, have some $1.6 trillion in foreign assets, with the United Arab Emirates, Saudi Arabia and Kuwait accounting for all but $100 billion of that amount. When attempting to track capital outflows from the GCC, the IIF noted an “extraordinary deficiency” of information, although it could glean that the six countries have “a strong interest in investments in emerging markets, particularly in the Middle East region and Asia.” Sovereign investment funds are financial tools created by governments with large trade surpluses and bountiful foreign reserves.
Source: Financial Times (registration required)
So far this year, sovereign funds in the Middle East and China have invested $37 billion in shares of western financial institutions. Financial Times staff writers Peter Thal Larsen and David Wighton argue that sovereign funds are more confident in the long-term outlook for banks than other investors. “Bankers say there is a big appetite among wealth funds for further investment in financial assets hit by the credit market turmoil,” they write.
Source: Financial Times (registration required)
Reference Material: Investing at the source
Dubai Holding’s official Web site has a breakdown of its subsidiary companies, including sovereign fund Dubai International Capital, providing information for potential investors and a brief introduction to the emirate of Dubai. Regarding the emirate, Dubai Holding writes that its “diverse economy, almost 94 percent of which stems from GDP non-oil products, has led to a per capita of $22,400. All in all, Dubai provides a vibrant cosmopolitan environment that fosters growth and has become an icon for 21st century living.”
Source: Dubai Holding
Zawya, a news service specializing in financial information on the Middle East, has a breakdown of Dubai Holding’s investments, subsidiaries and balance sheet.
Source: Zawya (registration required)
Mubadala Development Company, the investment concern of the government of Abu Dhabi, has an overview of the company’s activities, management and press releases on its Web site.
Source: Mubadala Development Company
Related Topics: The UAE’s Foreign investment interests
For information on the Abu Dhabi Investment Authority’s purchase of a 4.9 percent stake in Citigroup, please see our “Beyond the Headlines” story “Flailing U.S. Bank Beckons Gulf Nation Investors”
Source: findingDulcinea
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