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DIFC eyes US property, telecom, energy assets

Investments could come after dust settles on mortgage crisis: governor

(DUBAI) The Dubai government agency that bought into Deutsche Bank this year said it could invest in US banks, property and other sectors after the dust settles on a mortgage crisis that has cut asset prices.

Banks that have reported losses from defaults on sub-prime, or high-risk mortgages, could be among the targets for DIFC Investments, which is helping drive Dubai’s push to build two of the world’s 10 largest financial institutions in eight years.

‘There are good opportunities and the prices are good, but is this the bottom or is there more downturn to come?’ Omar bin Sulaiman, governor of the Dubai International Financial Centre (DIFC), told Reuters on Monday.

Asked whether the targets could include firms such Citigroup and Merrill Lynch, Mr bin Sulaiman said: ‘Without mentioning names we have a track record of taking stakes in major banks, with the right partners for management.’

Citigroup, the largest US bank, and Merrill Lynch, the world’s largest brokerage, replaced their chief executives after reporting credit market losses of at least US$21 billion between them.

DIFC Investment’s purchases in the United States could include property, telecom, and oil and gas assets, Mr bin Sulaiman said.

Defaults on sub-prime mortgages drove up borrowing costs around the world and prompted banks to shrink from riskier lending, making it more difficult for private equity funds to finance acquisitions.

The collapse of takeover bids, including Qatar’s plan to buy British supermarket chain J Sainsbury plc, and a tumble in stock prices this year has made assets cheaper.

‘The challenge is how low do we look. There are good assets in the US, good opportunities for acquisitions to be identified,’ Mr bin Sulaiman said.

‘The price has to be right and you need to understand the strategy of the organisation and if that aligns with our strategy, the decision is easier,’ he said.

Mr bin Sulaiman leads the financial services strategy of Dubai, which created the DIFC, a self-regulating dollarbased investment zone, to capture banking and other business in the world’s biggest oil-exporting region.

Having turned state companies into the world’s eighth largest airline, Emirates, and fourth largest port operator, DP World, Dubai wants to build two of the world’s 10 largest financial institutions by 2015.

‘It could be through acquisitions or home-grown,’ Mr bin Sulaiman said.

DIFC Investments bought a 2.2 per cent in Deutsche Bank this year to become the fifth biggest shareholder of Germany’s largest bank. The purchase was worth about 1.35 billion euros (S$2.9 billion) at the time the deal was announced in May.

DIFC Investments is looking to invest about US$1.8 billion in an unidentified publicly traded financial services company among the 20 acquisition targets it is evaluating, the agency’s managing director, Bisher Barazi, said in September.

Separately, Dubai International Capital LLC, the manager of US$13 billion for the emirate’s ruling sheikh and coinvestors, plans to buy a US$500 million stake in a publicly traded Japanese company this year.

‘We’re looking at a Japanese-headquartered company we like very much,’ chief executive Sameer al-Ansari said in an interview in Dubai on Monday.

Dubai International will host a group of Asian companies in Dubai next month to discuss investment opportunities, Mr al-Ansari said. Nobuyuki Idei, chairman of Sony Corp’s advisory board, and Eishu Kosuge, chairman of Daiwa Securities SMBC Europe, will speak at the event, according to Dubai International’s website.

Dubai International last month agreed to buy a US$1.26 billion stake in New York-based hedge fund Och-Ziff Capital Management Group LLC. Dubai International aims to raise assets under management to more than US$25 billion by mid-2009, it said in July.

 

Source: Reuters, Bloomberg (Business Times 21 Nov 07)

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