Portfolio diversification by the Dubai authorities proceeded apace on Thursday with news that Dubai International Capital has built a 3.12 per cent stake in European Aeronautic Defence and Space Company.
Yes, that’s EADS, the controlling shareholder in Airbus. As Dubai re-cycles the petro-dollars it receives indirectly, the emirate is clearly ready to do a bit of political stress-testing as it spreads its financial risk.
The holding, worth about €600m, has been acquired through the Global Strategic Equities Fund, which in early May revealed it had made a “substantial investment” in HSBC as part of a wider $10bn investment plan. The fund is ultimately controlled through Sheikh Mohammed bin Rashid al-Maktoum’s Dubai Holdings and the intention is to invest in a range of Fortune 500 companies across the world.
It will be interesting to see whether Dubai’s small stake in EADS has any repercussions on the delicate Franco-German balance of power at the aerospace and defence group, where a clumsy management and shareholding structure has ensured years of infighting. But the hope from the European side is likely to centre on commercial considerations, with Dubai-based carrier Emirates already a big Airbus customer.
We might have expected more fireworks if the Sheikh’s advisers had plumped for Boeing rather than Airbus.
One assumed reason for the existence of the Global Strategic fund is to demonstrate Dubai’s financial maturity to blinkered Western types. The emirate found itself ensnared in the P&O affair last year, when DP World was forced to sell P&O’s American ports business after US objections to the £4bn takeover. While the deal was given the green light by the US Committee on Foreign Investment, a congressional uproar forced DP World to find an American buyer for the assets.