Abu Dhabi's Mubadala, IPIC investment funds to merge

Published June 30th, 2016 - 10:00 GMT
The merger is part of Abu Dhabi economic reforms which commenced in 2001. (Erem News)
The merger is part of Abu Dhabi economic reforms which commenced in 2001. (Erem News)

Abu Dhabi will merge two of its investment funds - Mubadala Development Company and the International Petroleum Investment Company (Ipic) - in a measure which would boost economic value of the emirate.

His Highness Shaikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, Deputy Supreme Commander of the UAE Armed Forces and Chairman of the Abu Dhabi Executive Council, has issued a resolution to merge the two investment funds, state-owned news agency Wam reported on Wednesday.

"Integrating the two entities would create greater benefits and enhance economic value to the Government of Abu Dhabi," it said.

The combined entity will realise synergies and growth in multiple sectors including the energy and utilities sector, technology, aerospace, industry, health care, real estate and financial investments.

"It will also have the ability to contribute more significantly to the diversification of the economy, in line with the Abu Dhabi Plan and the country's long-term vision," it said.

"This merger will allow Abu Dhabi to create focus and scale in selective areas of the energy and utilities industry, bringing together the strength of Mubadala and Ipic," said Anshu Vats, partner and head of public services practice at Oliver Wyman in the Middle East and Africa region.

"This strategy will produce potentially high-quality outcomes for the nation in the near future - in terms of GDP, jobs, global positioning and economic value add," he said.

A joint committee has been set up to oversee the mega merger. The joint committee will be chaired by Shaikh Mansour bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs, with Khaldoon Khalifa Al Mubarak serving as Vice Chairman and the membership of Suhail bin Mohammed Faraj Al Mazrouei, UAE Minister of Energy; Hamad Al Hurr Al Suwaidi, and the Chairman of the Abu Dhabi Department of Finance.

The merger is part of Abu Dhabi economic reforms commenced in 2001, which saw privatisation of electricity and water assets, disinvestment of state owned corporations, introduction of public private partnership where state is providing land and inviting the private sector firms to set up infrastructure and real estate projects on commercial basis.

Earlier this month, talks began on the possible merger of the UAE's second biggest lender by assets National Bank of Abu Dhabi and First Gulf Bank. In recent years, Abu Dhabi merged several of its government departments and agencies. It began with the merger of Abu Dhabi Tourism Authority and Abu Dhabi Culture Authority into the Tourism and Culture Authority.

Early in the year, Abu Dhabi Municipality and the Abu Dhabi Transport Department become Abu Dhabi Municipality and Transport Department to achieve greater efficiencies.

But the  biggest commercial merger took place when Sorouh Real Estate was merged into Aldar Properties to become one of the largest real estate company in Middle East, in June 2013, with combined assets of Dh46 billion.
The two real estate companies were greatly impacted by the global financial meltdown of 2008.  

In 2014, Emirates Defence Industries Company was established after integrating the assets of Mubadala Defense, Emirates Advance Investments Group and Tawazun Holding.

Mubadala's role had been to make investments to help advance Abu Dhabi and its economy. Apart from acquiring stakes in General Electric, Carlyle Group and ownership of New York-based chipmaker Globalfoundries, along with AMD, the investment company established successful ventures like clean tech giant Abu Dhabi Future Energy Company, or Masdar, satellite operator Yahsat, Strata Manufacturing that manufactures aircraft components, naval shipmaker Abu Dhabi Ship Building and investment firm Al Waha Capital.

Ipic has investments in 18-global downstream energy companies that include Spanish energy firm Cepsa, Canadian petrochemical maker Nova Chemicals and has a majority stake in Austrian plastics company Borealis.

Mubadala earned Dh1.2 billion in profits in 2015, while its assets reached $67.1 billion.

Ipic earnings plunged 29 per cent to Dh5.6 billion in the year 2015, while its assets valued at $66.3 billion.

By Haseeb Haider

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