The International Petroleum Investment Company is set to acquire a majority interest in Aabar Investments, a UAE holding company. Aabar shareholders voted yesterday to issue a Dh6.6 billion (US$1.8bn) convertible bond to the Abu Dhabi energy investment fund. By November next year, the bond will be converted into new shares amounting to a majority of the company's stock at a price of Dh3 a share. Aabar's stock price stood at Dh3.75 yesterday before the announcement.
The bond amounts to a capital infusion of Dh8.9bn for Aabar, which, added to its existing cash reserve of Dh2.3bn, constitutes a substantial war chest for acquisitions. "The transaction will further strengthen Aabar's capitalisation and financial resources, providing substantial assets for future investments as well as access to Ipic's pipeline of global investment opportunities," said Abdulhamid Saeed, the chairman of Aabar's board of directors.
It represents a new beginning for the company, which targeted the oil and gas sector but steadily sold off its assets over the past 12 months. It is also a return to the past for Aabar, because it will once again be controlled by a Government-owned company three years after being launched by the Mubadala Development Company, another Abu Dhabi investment fund. Aabar posted a second-quarter net profit of Dh546 million, largely as a result of the sale of its Singapore-based Pearl Energy unit to Mubadala.
In January, it sold Dalma Energy, a drilling services unit, for $446 million (Dh1.64bn) to a group of Saudi investors. After this year's sale of assets, Aabar is essentially a bank account, holding little more than a pile of $615m in cash. Aabar will pay Ipic 1.95 per cent on top of the three-month Emirates Interbank Offered Rate (EIBOR), which has recently hovered around three per cent, for the convertible bond.
Ipic will be permitted to convert the bond into shares at any time. Ipic indicated the deal would offer Aabar new opportunities to invest its sizeable cash reserves. "We offer Aabar a pipeline of global investment opportunities and our track record of success originating and closing attractive investments," said Khadem al Qubaisi, the managing director of Ipic "We look forward to becoming a close strategic partner with Aabar during the next stage of the company's corporate development," he said.
Yesterday's announcement was the latest move in a series of multi-billion dollar deals for Ipic, which controls about Dh51bn in assets. In April, the company acquired a two per cent stake in Energia de Portugal, the Portuguese utility, and in June it announced it would build three oil refineries in Pakistan and Morocco. In July, the company said it would create a $1bn fund in partnership with the government of Kazakhstan to invest in oil and gas projects in central Asia, which mirrored an announcement the fund made in March that it would create a similar $2bn energy fund in partnership with the Qatar Investment Authority.
In the UAE, Ipic is building a pipeline that will transport 1.5 million barrels a day of crude oil to a port in Fujairah, bypassing the Strait of Hormuz. The company is also investing in a major chemicals complex at Taweelah and a refinery in Fujairah. @Email:cstanton@thenational.ae