Abu Dhabi makes big waves


Sudip Roy
Published on:

Abu Dhabi Inc is on the march. While the Abu Dhabi Investment Authority buys assets on behalf of the government in the capital markets, two other investment vehicles are charged with helping make the emirate one of the most developed economies in the world through strategic direct investments. They are the International Petroleum Investment Company and Mubadala Development Company.

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Ipic was established in 1984 to invest in the hydrocarbons and related sectors outside Abu Dhabi. Mubadala was formed in 2002 and invests in a wide range of sectors, including industry, telecoms, technology, healthcare, energy and utilities.

Both are state-owned but are run on commercial principles. Mubadala, for example, is not only there to invest but also to develop specifically sustainable opportunities for and in Abu Dhabi. Both vehicles seek to take stakes in companies or on-the-ground projects. Ipic, for example, has stakes in Korea’s Hyundai Oilbank (50%), Austria’s öMV (17.6%) and Denmark’s Borealis (65%), among others. Mubadala’s investments include Ferrari (5%), Abu Dhabi Ship Building (40%) and Imperial College London Diabetes Centre (100%).

“An exit decision will be triggered when we reckon the investment has reached a level of maturity when no more commercial and strategic value can be extracted from it”
Khaldoon Khalifa Al Mubarak

Khaldoon Khalifa Al Mubarak, chief executive of Mubadala
One way Mubadala invests is through partnerships. In 2004, for example, it joined forces with Germany’s VW group and Saudi Arabia’s Olayan Group to buy LeasePlan, the world’s biggest vehicle management and leasing provider. Mubadala and Olayan each have a 25% stake; VW owns the rest. The transaction was funded through a mixture of debt and equity.

Khaldoon Khalifa Al Mubarak, chief executive of Mubadala, says that Abu Dhabi investors have a very strong record. “Abu Dhabi has never reneged on a partner,” he says.

He adds that the company, which does not disclose the size of its assets, will focus more on opportunities in southeast Asia, the subcontinent and China. It is also seeking to diversify across more sectors. It plans to invest more in real estate and financial institutions, for example.

Ipic too is focusing more on Asia. “It’s the best region to find opportunities,” says Mohammed Al Khaily, managing director at the investment firm. “Most of [Abu Dhabi’s] hydrocarbons go there.”

One place Ipic is unlikely to invest is the US. “We’re looking but the strategic rationale [to invest] is difficult for us as nothing we produce goes there. It is also too far way,” he says.

As a financial investor, Ipic, which has $8 billion of assets, does not typically participate in the day-to-day management of invested companies. It seeks a minimum 13% return.

So far Ipic has divested its stake in one company while Mubadala has yet to sell. They are both long-term investors. “An exit decision will be triggered when we reckon the investment has reached a level of maturity when no more commercial and strategic value can be extracted from it,” says Al Mubarak.