Abu Dhabi’s government has merged two of its top investment funds in an attempt to reinforce their financial strength at a time when low oil prices are hampering investment efforts.
The merged companies – Mubadala Development Company and International Petroleum Investment Company – will form a new entity known as Mubadala Investment Company, which will have assets totalling $125 billion, based on valuations made at the end of 2015.
Between the two companies, they own and control corporate stakes in the energy industry and other sectors across the world. The new company will be the 14th largest sovereign fund in the world, according to data from the Sovereign Wealth Fund Institute.
Mubadala Investment Company will be run by Khaldoon al-Mubarak, who will serve as chief executive officer, a WAM report said, which also added that a board had been formed. Mubarak was previously the chief executive of Mubadala Development Company. He also sits on a number of other boards, the report said.
The merger comes in the wake of Mubadala Development not receiving new cash from the UAE government in 2015 – the first time this has happened in eight years.
This is symptomatic of a regional issue facing Gulf Arab sovereign wealth funds, which have been affected by oil prices being at about half their levels in mid-2014. As a result, funds have had to adjust their policies to cope with the lower inflow of petrodollars.
Citing a source close to the deal, a Reuters report said that the new firm’s large size would improve its ability to raise money from international markets. The plan was originally announced in June 2016.
Mubadala Investment will have a total of 68,000 employees globally, with partnerships and businesses in more than 30 countries, the company said in a statement. Amongst its assets are stakes in General Electric and the private equity firm Carlyle. It also has stakes in Spanish energy firm Cepsa and the Austrian energy firm OMV.
Locally, the company has a stake in the UAE-based construction giant, Arabtec.
As part of its drive to strengthen its strategically important financial firms, Abu Dhabi has begun the process of merging its two biggest banks – The National Bank of Abu Dhabi and First Gulf Bank, the Reuters report said. It added that bankers in the emirate expect more mergers to happen in the near future.