GE: How to (Quietly) Marry a Sovereign-Wealth Fund
The latest popular import from the Middle East isn’t oil: it is money. And the race is on among American financial institutions to find a deep-pocketed Middle Eastern sovereign-wealth fund that has plenty of it. But, considering how much controversy has surrounded foreign investors, perhaps it is better not to flaunt it.
Consider General Electric’s arrangement, announced today, with Mubadala Development Co., an Abu Dhabi-backed investment fund. GE said it agreed to an $8 billion commercial-finance partnership with Mubadala to invest in the Middle East and Africa. Morgan Stanley advised GE on the joint venture and Mubadala took advice from Lehman Brothers and Goldman Sachs.
Mubadala is an experienced investor in the U.S. already. It holds a 7.5% stake in Carlyle Group for which it paid $1.35 billion and an 8% stake in Advanced Micro Devices for which the fund paid $622 million.
Still, the GE arrangement shows how sensitive it still is for big companies to form relationships with sovereign-wealth funds. GE and Mubadala treaded lightly around the idea that they would be doing business together. Mubadala said only that it would be one of GE’s “top 10 institutional investors.” It plans to buy GE shares, but coyly said it would do so only “as conditions allow.” It didn’t say when it would do this, or how much of GE it eventually wants to own, although the goal is certainly to increase its stake to becoming a major investor, according to this WSJ article.
In fact, the CEO of Mubadala, Khaldoon Mubarak, told CNBC’s Maria Bartiromo that Mubadala doesn’t even consider itself a sovereign wealth fund; instead, it calls itself a “private investment firm” that is looking for returns. And Immelt said Mubadala was much like GE itself.
General Electric appears to be pursuing something like the same kind of relationships in the region that Citigroup and its predecessor Citicorp had the foresight to establish in the 1990s under Sanford I. Weill and John Reed. Those relationships came in handy late last year when Citigroup was looking for capital. Who can blame General Electric for wanting that?
More like marry your smart but slightly funny-looking daughter to a sovereign wealth fund, but I get your point. It’s far from your worst use of metaphor.
Good, I am glad I bought 1500 shares of GE in the 26 range. Looks like it will pan out nicely. I chose to buy 1500 shares of GE instead of replacing my 1998 Toyota Corolla.
I am young so 20-25 years is my timespan for investing. GE should be doing well.
GE’s fundamental problem.Here we go again,another goofy Jeff Immelt initiative.Instead of fixing GE’s existing businesses,he focuses on Ecoimagination and continues to chase the finance apple,even after having lost billions in the housing crisis.Two things to do,get rid of Immelt and split up the company.Jack Welch’s biggest mistake was selecting Immelt.
Americans Keep Your Darn Mouths Shut And Take It!!!
Long Live The Washington Rich Insiders Hail The Rich Greedy - McRich - Phil Gram Rich Washington Insiders.
You the American People Are Just a Bunch of Crazies That need to be dictated too BY The Rich Greedy.
Its good for The Rich Greedy and the country if the rich greedy steals taxpayer money to bail-out the rich greedy To replace American workers with cheap slave labor to get rid of American farmers with cheap crops from overseas get rid of the fishermen with cheap imports.
The New American Constitution We the Corporations For the Corporations By the Corporations.
So sit down and Shut-Up Americans Your corpro Gods Have Spoken.
I am surprised the WSJ attracts more than its fair share of sloganeering nuts that interfere with intelligent discourse. The NY Times and The Economist seem to largely avoid them. Perhaps some moderation is in order?
Hi,
We only delete abusive comments — those that use obscenities or are purely personal attacks.
Well they fought cleaning up the Huson River PCBs for 20 years and then renamed themselves the Ecocompany and people beleive it so doing Business with Abu Dahbi should be an easy sell!
Woot- it you’re young, then it probably isn’t a good idea to invest $40K in any one stock. Maybe you have a trust fund, but what about diversifying into something that doesn’t have a $200B+ market cap?
Once we realize we cannot do it alone, international partnerships will be the way to go…what better way to recycle the oil bucks than to invest in GE which has technology that will make oil obsolete eventually.
When are the auto builders going to make engines that run on natural gas to help lower the price of oil until we produce an ALTERNITE fuel.
GE is a bank and its manufacturing arm will never dominate its value. Time to do some massive restructuring including spinoffs. Selling out to get back our oil dollars is temporary and dilutive and a little dirty.
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