Monday, Oct 10, 2011
By Alex Delmar-Morgan and Mirna Sleiman
Of DOW JONES NEWSWIRES
DOHA (Zawya Dow Jones)--Qatar's royal family on Monday snapped up the private-banking unit of Belgium's KBC Group N.V. (KBC.BT) for 1.05 billion euros ($1.44 billion) and is in talks to acquire the Luxembourg arm of stricken Dexia SA (DEXB.BT) bank, as the wealthy Gulf state ramps up its buying of distressed European assets.
Analysts and bankers familiar with Qatar's investment plans say the gas-rich state is considering further investments in debt-laden European countries and is more willing to take risks than its other wealthy neighbors during a year of high oil prices and low growth in the West.
"What I understand from dealing with the Qataris is that they are keen on stepping up their investments in Europe and that is through their sovereign fund and royal individuals," said a banker familiar with the wealth fund's plans.
KBC Group said Monday it had agreed to sell its Luxembourg-based private-banking unit to Precision Capital, a Luxembourg company backed by the Qatari royal family, the Al Thanis. The Al Thanis are also looking at the Luxembourg division of Dexia, Luxembourg Prime Minister Luc Frieden said Monday, stressing that his government would keep a minority stake in the unit.
Investments made by the sovereign wealth fund and the Qatari royal family are separate. However, the latest round of asset buying in Europe shows Qatar's opportunistic tendency to pounce on what it considers to be bargains, analysts and bankers said.
"When there are very few buyers in the market and lots of assets for sale, Qataris are doing the tough bargaining," said a person familiar with the wealth fund's plans.
Qatar's powerful prime minister, Sheikh Hamad Bin Jassim Bin Jaber Al Thani, the second-in-command to the country's ruling Emir, controls the investment arm of the country's sovereign wealth fund, Qatar Holding, which last week ploughed nearly $800 million into London-based European Goldfields Ltd. (EGFDF, EGU.T), which has major mining operations in Greece.
In August, Paramount Services, a group backed by the Qatari royal family said it would inject 500 million euros into the entity created by the merger of Greece's Alpha Bank (ALPHA.AT, ALBKY) and Eurobank.
"Nobody has done very much in the region apart from Qatar this year and the deals which they have done have been high-profile, distressed situations," said another person familiar with the country's investment strategy.
Europe's sovereign-debt crisis has created opportunities for wealthy Gulf states like Qatar, which have enjoyed years of high oil prices and surging gas revenues. Qatar, which expects its economy to grow at 16% this year, said in its budget in April it would have a surplus of 22 billion Qatari riyals ($6.04 billion) in 2011/12 based on an oil price of $55 per barrel. Oil has been over $100 a barrel for most of the year.
Qatar has used its huge wealth to invest in an ever-expanding list of prize assets abroad, which include luxury London department store Harrods and Grosvenor House, the former U.S. embassy building in London.
Qatar Holding injected billions of dollars into both Credit Suisse Group (CSGN.VX, CS) and Barclays PLC (BARC.LN, BCS) in 2008, providing them with vital capital at the height of the global financial crisis.
Bankers say the range of investments illustrate Qatar's opportunistic approach.
"I don't think they have a strategy to go after a certain sector--they will look at each opportunity on its own merit," said a Doha-based banker.
Other Middle East sovereign wealth funds have taken a more cautious approach to Europe's debt crisis.
The Abu Dhabi Investment Authority, or ADIA, estimated to be the Middle East's largest sovereign wealth fund, may be cautious on banks after a controversial 2007 investment in Citigroup Inc. (C) resulted in ADIA launching a legal action against the U.S. banking group.
According to ADIA's annual review, 35%-50% of its investments are located in North America, Europe and Asia, while only 15%-25% is held in emerging markets.
"It's clear from what's happening now and the few previous deals that Qatar's sovereign fund is taking the less-traditional route compared to the KIA's [Kuwait Investment Authority] conventional way of investing," said the person familiar with the wealth fund's plans. "Abu Dhabi does both but not as aggressive as Qatar."
Rami Sidani, head of investment at Schroders Investment Management for the Middle East & North Africa, said some of Qatar's investments could turn sour but ultimately their strategy was long term.
"Some of the investments will be under severe pressure," he said. "As long as these banks don't go bust or they don't get major dilution due to government support, these investments are for the long run."
-By Alex Delmar-Morgan and Mirna Sleiman, Dow Jones Newswires;
+974 6659 9818; alex.delmar-morgan@dowjones.com
--Inti Landauro and Matthew Dalton in Brussels contributed to this article.
(END) Dow Jones Newswires
10-10-11 1935GMT
