QIA, PIF, EIA, ICD, ADQ either ADIA. Behind these acronyms are some of the richest governments in the Middle East. It’s about your sovereign funds, those that in recent years have proliferated in many large Spanish companies and also in other more exotic businesses, such as football clubs, hotel groups or startups. But in recent weeks, a series of operations that occurred almost continuously have shown how these investment arms with pockets of gold do not lose sight of Europe’s critical infrastructures. and, of course, also Spain.
Thus, Adnoc (Abu Dhabi National Oil Company), a state oil and gas company that has been diversifying its investments and operations in recent years, has signed a record deal for the German chemical company Covestro for 14 billion euros. The agreement values the company at 62 euros per share, although it depends on the Abu Dhabi oil producer receiving at least 50% plus one share in its takeover bid (takeover bid). The price represents a premium of approximately 11% to last Monday’s closing price.
Meanwhile, in Spain, Masdar, dependent on the Government of Abu Dhabi, has disbursed more than 2,000 million euros in two different operations. The first was signed for an Endesa solar ‘megaportfolio’, called the Ra project, for 817 million euros. The second transaction, which arrived just a few weeks later, was the purchase of Brookfield’s renewables group, Saeta Yield, for €1.2 billion. Just this week, Masdar has also completed the acquisition of a 50% stake in the American Terra-Gen Power Holdings II from Energy Capital Partners (ECP), a company with a presence in Texas and California that has a gross operating power of 3 .8 GW of wind, solar and battery storage projects.
Ignacio Hornedo, Mercantile and M&A partner at A&O Shearman, explains that “The energy transition and the need to position ourselves for a more decarbonized economy is the main driver. Europe – and Spain in particular – is a friendly and reasonably safe jurisdiction, especially for Arab sovereign funds. Their strategies are long-term, even longer than the traditional infrastructure fund with low capital costs. “This allows them to be more daring when valuing assets in competitive processes.” Hornedo adds that “from the M&A point of view, their influence on the market is very important and they are always feared (or desired, depending on the position you are in) candidates in any organized asset sale process.”.
For its part, Miguel Tiana, general director of COFIDES, affirms that sovereign funds “are in a position to play a leading role in supporting global challenges such as those linked to the green and digital transition of the economy”. Regarding their characteristics, Tiana adds that “they develop their investment strategies with a medium and long-term focus. Therefore, it is common for this type of investors to maintain their investments for significantly longer periods than those of private equity managers.”
All of these large operations are being analyzed by different organizations with increasing attention from the West. And from the almost 90 billion dollars that Arab funds invested in 2022 around the world, these entities spent 52 billion dollars on investments between Europe and North America, according to data from the consulting firm Global SWF.. The trend continues to increase. In the first nine months of 2024, Gulf sovereign investors invested $55 billion in 126 different operations. This represents 40% of all operations carried out by these investors worldwide, the same level as in 2023 and a much higher figure than in previous years.
We must not forget that a good part of these investments are made indirectly, that is, through managers in which they have a significant participation. For example, Mubadala’s entry into the management company Fortress, which was authorized this year after an exhaustive review and subsequent approval by the Committee on Foreign Investment in the United States (CFIUS)..
The Ministry of Economy estimates that Spain experienced record levels of sovereign fund activity in 2022 during 2022 and the first half of 2023, in a context of economic, geopolitical and social uncertainty.
So far this year, these funds have made different attempts to increase their footprint in the selective Ibex 35 club. Without being strictly a sovereign fund, the Emirati electricity company Taqa, owned by Abu Dhabi Power Corporation (ADPower), has tried its luck without success to take a significant stake in Naturgywhile PIF, the sovereign fund of Saudi Arabia, has acquired 10% in Telefónica through STC.
The historic strategy of diversifying million-dollar investments
The trickle of investments from sovereign funds in the West has reached all types of businesses. In this sense, Qatar has been one of the most active countries through QIA, which stands for Qatar Investment Qatar Investments Authority). The Emirate’s investment arm has explored all kinds of options, such as the PSG football club. In Spain, the Arab country has become interested in the world of sports with its landing through Qatar Sports Investments (QSI) in the World Padel Tour (WPT) in a historic agreement. The pact reached with Damm allows the country to dominate the professional competition of this sport and unify it into a single world circuit.
Abu Dhabi, with ADIA (Abu Dhabi Investment Authority), has also leaned towards more exotic businesses, such as the hotel world. Thus, in 2023 it closed the purchase of 17 hotels managed by Meliá Hotels International after an initial offer of close to 700 million euros.
GIC (Government of Singapore Investment Corporation), for its part, has leaned towards these options, as evidenced by the investment of 1,500 million in housing in Spain or the acquisition of 35% of Hotel Investment Partners (HIP)a hotel chain owned by Blackstone and which was originally a hotel subsidiary of Banco Sabadell. The operation was valued at 1.4 billion euros. This fund has even ventured into the Spanish technology sector, with the investment in the Barcelona company Factorial, a start-up specialized in human resources software for SMEs, in an operation with the British fund Atomico and other investors such as Tiger Global, CRV, K-Fund and Creandum.
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