GE focuses on Middle East with $8-billion carbon-neutral city
24 July 2008
In a clear sign of the slowing US economy and the growing importance of oil money in today's world, century-old American conglomerate General Electric (GE) has announced a $8-billion joint venture in the Middle East at the same time it is cutting down its operations at home and in other developed countries.(See: GE extends appliances divestment to entire consumer and industrial group and GE sells Japanese consumer lending business for $5.4 billion to Shinsei Bank)
On Tuesday, 22 July, GE signed an $8-billion joint venture with the Abu Dhabi state investment agency Mubadala Development Co that would lead to the Arab firm becoming one of the largest investors in GE.
The initial focus of the venture would be on providing commercial finance in the Middle East and Africa. The two companies also plan to work together in the clean energy and water, aviation, and oil and gas sectors, they said.
Under the deal, each party will invest $4 billion over three years. That $8 billion will then be leveraged up to five times with debt, which means that as much as $40 billion could be invested.
Over the next 18 months the companies plan to invest the amount in commercial and infrastructure projects in the region, GE's fastest-growing market. The companies said Mubadala "plans over time" to become one of GE's 10 largest shareholders by acquiring shares in the open market.
That would mean buying, at the very least, nearly $3 billion of GE shares in the open market. (GE's current tenth-largest institutional shareholder, Wellington Management Co, owns 101.3 million shares worth about $2.96 billion).
"It makes a lot of sense for us to become shareholders in GE," said Mubadala CEO Khaldoon Al Mubarak. "We like the company. We think that under Jeff's management this is an institution that has done extremely well."
Al Mubarak said Mubadala has no stake in GE at this time, and he declined to specify a timeframe for when his company would become a major GE shareholder.
