Abu Dhabi’s Mubadala Investment Co. is set to do bigger deals, scout for investments more widely and spread its presence over more industries after a recent tie-up with another local fund doubled its size.
The combination of Mubadala and the Abu Dhabi Investment Council in March created an entity with more than $250 billion of assets, enough to join an exclusive club of sovereign wealth funds and national state pension plans that compete globally with private equity for the largest acquisitions.
“With that scale we have the ability to look at deal flow all over the world,” Chief Executive Officer Khaldoon Al Mubarak said in an interview with Bloomberg Television in Malta, New York. “It allows us to have a larger, diversified portfolio, in terms of both geography and sectors, and that gives us a better investment profile.”
Created in 2002, Mubadala is part of Abu Dhabi’s efforts to diversify its economy by turning oil revenue into profitable investments while also attracting expertise and jobs. After merging with Abu Dhabi’s International Petroleum Investment Co., Mubadala last month said 2017 revenue rose 14 percent. It used its “integrated portfolio” to increase stakes in existing companies, sell mature assets and enter new sectors in international markets.
The fund consolidation is part of a broader evolution in Abu Dhabi’s approach to managing its capital after crude prices fell in recent years. The emirate’s two largest lenders — National Bank of Abu Dhabi and First Gulf Bank — were also combined last year to create First Abu Dhabi Bank.
The fund’s objective, Al Mubarak stressed, is still to generate “an attractive rate of return,” and it now has the financial firepower to pursue opportunities previously out of reach.
There have been other changes. While Mubadala was once a buy-and-hold investor, since January Al Mubarak has embarked on initial public offerings for two companies in its portfolio, Emirates Global Aluminium PJSC and Cepsa Trading SA.
“The culture of these investment companies, the ones I’ve been involved with, was about accumulating assets and then just maintaining it,” Al Mubarak said. “The shift that has happened over the last couple of years, that I’ve tried to push at Mubadala today, is a monetization strategy that makes sense, not with a view to cash out but with a view to reinvest.”
Al Mubarak expects Emirates Global Aluminium to go public in the second half of this year or early 2019. Mubadala has also hired banks to manage a share sale for Cepsa, a Spanish energy company, which will “hopefully” happen this year.
The fund also is considering the sale of a majority stake in EMI Music Publishing, which owns the rights to some 2.1 million songs, and is in talks with Sony Corp. and its other partners in that investment, Al Mubarak said. Mubadala hasn’t decided how to proceed with a “potential transaction,” he said.
Al Mubarak was in upstate New York to visit a $15 billion semiconductor plant owned by GlobalFoundries Inc., one of its other investments. The company, a roll-up of manufacturing assets from three chipmakers, operates in a brutally competitive, cyclical industry and has struggled to reach Mubadala’s cash flow target. In March, Al Mubarak removed the GlobalFoundries CEO and appointed a successor.
Partly, because of its experience with GlobalFoundries, Mubadala is more open to working with other companies on technology investments.
“Success always comes our way when we’ve partnered with the best in class,” Al Mubarak said. “Technology is a very difficult field, it’s so competitive. You can have a lot of misses before you get any good hits.”
Mubadala recently passed on an opportunity to invest in Abraaj Group, the Middle East buyout firm that’s been roiled by allegations of misused funds.
“We had one meeting that looked at it and made a decision that’s not for Mubadala,” Al Mubarak said. “Our plate’s full, we’re doing a lot of interesting things. So, frankly, given the issues Abraaj is dealing with, we decided to focus on the priorities.”
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