Abu Dhabi eyes merger of sovereign funds Mubadala and IPIC

Abu Dhabi plans to merge two of its largest sovereign investments funds as the sheikhdom pursues consolidation in the financial-services industry after the slump in oil prices.

A combination of International Petroleum Investment Co. and Mubadala Development Company PJSC would pool assets of about $135 billion and debt of about $42 billion, according to Bloomberg calculations. The emirate will create a committee to oversee the merger that includes U.A.E. Deputy Prime Minister Sheikh Mansour bin Zayed Al Nahyan, according to a statement on the state-run WAM news agency.

It’s the second merger of significance to be announced in two weeks after National Bank of Abu Dhabi PJSC and First Gulf Bank PJSC confirmed plans to pursue a combination on June 19. The emirate is grappling with declining oil prices and said that a deal would bring cost savings and growth in areas such as financial services, health care, technology and aerospace.

“The development is positive for the Emirate of Abu Dhabi, especially in light of the challenging environment both globally and in the region,” said Chavan Bhogaita, head of market insight and strategy at National Bank of Abu Dhabi. “Bringing IPIC and Mubadala under common control will allow Abu Dhabi to undertake and manage investment activities in a more sustainable manner and better aligned with the emirate’s longer-term ambition.”

Mubadala owns stakes in publicly traded companies across the emirate and internationally. It’s the largest single investor in Advanced Micro Devices, Inc. with an 18 percent stake and also owns a 30 percent holding in Abu Dhabi’s biggest developer, Aldar Properties PJSC, and 7.1 percent stake in First Gulf Bank. IPIC has holdings in several energy and petrochemical companies, including Spain’s Cepsa SA and Vienna-based Borealis AG.

Abu Dhabi, which sits on 6 percent of global oil reserves, will see economic growth slow to 1.5 percent this year, from 4.3 percent in 2015, the International Monetary Fund said in May. The drop in oil price has prompted the government to plan spending cuts of 17 percent of economic output this year.

source: Bloomberg

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