DUBAI — Dubai International Capital LLC (DIC) said its $2 billion Global Strategic Equities Fund (GSEF) has acquired 3.12 per cent stake in European Aeronautic Defence and Space Company (EADS), the manufacturer of Airbus aircraft.
The investment, the value of which could be $838 million at yesterday's closing share price of EADS, would make the Dubai buy-out fund one of the largest institutional shareholders in the world's second largest aerospace conglomerate. It also is the second investment by the fund in less than two months in a Global Fortune 500 Company.
DIC is the international investment arm of Dubai Holding. A DIC statement said the new transaction comes less than two months after GSEF made a substantial investment in HSBC Holdings plc, a leading global financial services firm. Both investments are a part of GSEF's mandate to invest in global Fortune 500 companies following the recent closing of its first round of fund-raising efforts at $1 billion in February 2007.
The fund seeks to become a leading shareholder in pre-eminent global large capitalisation stocks, whilst aiming to create value through long term exposure to a concentrated portfolio of undervalued companies.
Sameer Al Ansari, Executive Chairman and Chief Executive Officer of DIC, said the latest investment in EADS — the manufacturer of Airbus aircraft — gets it closer to seeing GSEF reaching its $10 billion investment mandate in global companies and achieving the global diversification and growth mandate for its investors including DIC and its parent company, Dubai Holding. "EADS has been on our shortlist from the outset. The company's' challenges are well-publicised, however we are confident that EADS' superior product offering, comprehensive restructuring programme and committed management represent a strong fit with GSEF's investment strategy."
"This year's Paris Air Show order intake — the best ever in commercial aircraft history since the inception of the show — supports our perception of the overall strength in the commercial aircraft cycle. Whilst we believe that the value of EADS' other commercial assets are under-estimated, we are supportive of EADS' management's announced steps to regain investor confidence by delivering the envisaged recovery plan at its Airbus subsidiary," Ansari said.
During this year's Paris Air Show, Airbus received a total of 425 firm orders from 19 customers, including Emirates airline, which is the largest customer of Airbus A380 super jumbo aircraft. In addition, Airbus received commitments for a total of 303 additional aircraft. Airbus President and CEO Louis Gallois was quoted at the end of the show saying that this Airshow has confirmed that Airbus is very much back on the market, continuing to satisfy customers with the right products. He also stated that this should give [Airbus] further incentive to pursue their efforts to turn the company around in order to be able to deliver on their promises.
EADS employs about 116,000 people at more than 70 production sites, above all in France, Germany, the UK and Spain as well as in the USA and Australia. In 2006, the company generated revenues of 39.4 billion euros.
GSEF's investment in EADS is supported by key limited partners who are co-investing alongside the fund in this strategic transaction. In line with GSEF's investment strategy, neither the fund nor DIC will seek a Board seat or take an active role with EADS but will seek to build a strategic relationship with the EADS management and shareholders, the statement said.
DIC has invested more than $6 billion on buying stakes in a spate of companies since being set up in 2004. On May 1, NewDawn GSE Asset Management Ltd, a unit of DIC Asset Management as well as the 'general partner' for GSEF, bought a stake, the size of which was not disclosed, in HSBC bank.
Last year, 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. In 2005, it bought the Tussauds Group, which runs Madame Tussauds wax museum, and the London Eye for $1.5 billion. It has also bought the British engineering firm Doncasters Group, a supplier to the US military, for $1.2 billion. 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 shareholderEADS, a Fortune 500 Company, includes Airbus, helicopter supplier Eurocopter, and space programmes firm EADS Astrium. It also claims to be 'the international leader in missile systems'. The group employs about 116,000 people at more than 70 production sites.