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DIC unit buys stake in HSBC

The investment in HSBC, the size of which was not disclosed, was made by NewDawn GSE Asset Management Ltd, itself a unit of DIC Asset Management as well as the 'general partner' for the $2 billion Global Strategic Equities Fund (GSEF).

Last month, Maan Abdulwahed Al Sanea, a Saudi investor, bought a 3.1 per cent stake in HSBC Holdings worth around $6.57 billion. The acquisition made Al Sanea the second-biggest shareholder in Europe's largest bank, just behind Barclays. GSEF's position in terms of shareholding would be known only after its investment size is revealed.

A DIC statement said the investment represented the first of a number of planned investments by GSEF in global Fortune 500 companies following the recent closing of a $1b fund-raising.

DIC, which is part of Dubai Holdings, also did not disclose the size of the stake or the price paid, beyond saying that the purchase made it “one of the leading shareholders in the company.”

Sameer Al Ansari, DIC’s executive chairman and chief executive, said GSEF’s investment in HSBC is another step in confirming DIC as a global investment company. This is the first of many planned investments that will eventually see GSEF investing about $10 billion in global companies. "We are very excited about our pipeline of investment opportunities that are available in the global equities markets.”

Reuters quoted a spokesman of DIC as saying that the risk of HSBC's shares falling is low. "The risk on the downside is very low. We don't see the sub-prime as an issue, he said referring to the sub-prime mortgage market troubles in the US.

The stake buying came as HSBC faced increasing scrutiny from investors. The group issued its first ever profits warning in February in the wake of the melt-down in the US sub-prime mortgage market. HSBC's problems in the US — a warning about $10 billion of bad-debt charges in the US sent the stock to an 18 low— created a buying opportunity for the Saudi billionaire Al Sanea, a long-term investor who believes the bank has strong fundamentals.

Sanea, a former fighter pilot of modest background who is now ranked 97th in the Forbes rich list, has been building the stake since mid-February when shares fell.

At the time of launching the fund, DIC chief had said the GSEF intended to make structured investments in Fortune 500 global companies. DIC is the cornerstone investor in this fund while other investors include government investment arms, family businesses and key institutions in the UAE, Qatar and Saudi Arabia. Commitments at the first closing totalled $1 billion with a second closing planned for early 2008.

Meanwhile, informed sources said Dubai Financial (DF), a subsidiary of Dubai Investment Group, the international investment arm of Dubai Holding, has short-listed about five banks as potential acquisition targets, .

Dubai Financial which focuses on acquiring controlling stake in financial institutions has earlier acquired a 31.5 per cent stake in Greece's Marfin Financial GROUP, one of the fastest growing banking groups in Europe. The company also holds a 40 per cent stake in Malaysia’s oldest Sharia-compliant bank, Bank Islam.

Sources said DF is currently analysing the financials of these banks in order to arrive at a proper valuation of the same. Most of these banks are small to medium-sized banks from Europe.

Established in 2004, DIC manages an international portfolio of diverse assets. In 2005, DIC bought The Tussauds Group, the largest operator of visitor attractions in Europe, for £800 million. In the same year, DIC acquired a significant stake in DaimlerChrysler, the world’s second largest carmaker, for $1 billion, making it the company's third largest shareholder. In 2006, DIC acquired Doncasters Group Limited, a UK-based manufacturer of precision engineering components and systems for £700 million; and Travelodge, the UK's leading budget hotel brand for £675 million.

DIC's nvestments include Ishraq, a $150 million investment company that was formed to bring the Holiday Inn Express brand of hotels to the GCC countries; and MENA Infrastructure Fund, a $500 million fund targeting investment opportunities in infrastructure projects in the Middle East and North Africa region. In 2005, DIC launched Jordan Dubai Capital, a $300 million investment fund that targets private equity opportunities in the Jordanian economy.