Abu Dhabi to merge sovereign wealth funds

A Mubadala Development Co. employee walks past the company's logo at their exhibition booth during the Singapore Airshow in Singapore on Wednesday, Feb. 20, 2008. Mubadala Development Co., an investment company owned by the Abu Dhabi government, plans to invest ``billions of dollars'' in Asia's aviation industry to supply parts and services to Boeing Co. and Airbus SAS. Photographer: Jonathan Drake/Bloomberg News©Bloomberg

Abu Dhabi has ordered the merger of two of its sovereign wealth funds, the International Petroleum Investment Company and Mubadala Development Company.

The proposed transaction is the latest attempt at cost savings by the Gulf states, which have been hit hard by the protracted slump in oil prices.

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Ipic, primarily a holding company for Abu Dhabi’s overseas oil assets, and Mubadala, a fund seeking to diversify the emirate’s economy away from hydrocarbons, have both been tested by the plunge in crude prices.

Sheikh Mohammed bin Zayed, crown prince of Abu Dhabi, issued a resolution creating a committee “assigned with the responsibility of merging the businesses of the two companies”, according to a statement.

The committee is to be chaired by Sheikh Mansour bin Zayed Al Nahyan, the owner of Manchester City and chairman of Ipic. Khaldoon Al Mubarak, Mubadala’s chief executive, will be the committee’s vice-chairman.

The statement about the proposed merger of Ipic and Mubadala said: “Integrating the two entities would create greater benefits and enhanced economic value to the government of Abu Dhabi.

“The combined entity will realise synergies and growth in multiple sectors including the energy and utilities sector, technology, aerospace, industry, healthcare, real estate and financial investments.”

Ipic and Mubadala will continue to operate independently until the committee concludes its work, added the statement.

Abu Dhabi, the oil-rich capital of the United Arab Emirates, derives about 90 per cent of state revenues from oil. It responded to the fall in crude prices by slashing spending by a fifth in 2015, and plans another year of austerity in 2016, with a 17 per cent cut.

Bankers have for years argued that Abu Dhabi, which has several state-related entities operating in similar sectors, should press ahead with a rationalisation programme to improve efficiency.

The National Bank of Abu Dhabi and First Gulf Bank, a lender part-owned by members of Abu Dhabi’s ruling family, this month announced plans to merge their operations.

Ipic has been dragged into the scandal surrounding 1Malaysia Development Bhd, a Malaysian state investment fund. Swiss authorities said in January they had found “serious indications” that about $ 4bn had been misappropriated from Malaysian state companies following a criminal investigation into 1MDB.

In May, Ipic claimed $ 1.2bn and accrued interest from Malaysia and 1MDB after alleging the Malaysian fund had defaulted on a bond interest payment.

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