Qatar Holding yesterday bought a major stake in Iberdrola, a publicly listed utility company based in Spain, for 2.02 billion (Dh10.35bn).
The outlay will give the division of the Qatar Investment Authority 6.16 per cent of the company, the head of Qatar Holding said yesterday.
"In addition to a strong, stable European franchise, our investment in Iberdrola provides significant exposure to other important global markets including Brazil, Mexico and the United States of America," said Ahmad Mohamed al Sayed, the managing director and chief executive of Qatar Holding. "As such, this investment represents a further step in our strategy of building a diversified portfolio of leading global enterprises."
The deal comes on the heels of a 2.5bn bid last week by Iberdrola to take full control of its renewable energy unit, Iberdrola Renovables. Iberdrola said it would use the cash injection from Qatar partly to finance that acquisition and would cancel a planned capital increase to pay for it. The new money from Qatar would also be used to buy Elektro Electricidade e Servicos in Brazil and pursue "other growth opportunities", Iberdrola said.
But another motive for the stake sale could be Iberdrola's attempt to fend off a bid by ACS, a Spanish construction company, to gain power on its board of directors, analysts say.
ACS owns about 15 per cent of Iberdrola, according to Bloomberg News data, and has repeatedly asked for representation on its board. Iberdrola, however, sees ACS as a competitor with conflicting interests.
"Iberdrola needs to reinforce its shareholding quick," said Victor Peiro Perez, an analyst at Caja Madrid in Spain. "Qatar is always an option in Europe because they have money and because it can be a partner for energy projects or construction."
Qatar Holding is expected to buy mostly newly issued Iberdrola shares at 5.63 each, a 5.5 per cent discount from their close on Friday. New shares will dilute ACS's holding in the company.
For Qatar, though, the deal appears to be mainly part of a drive to cement relationships with European construction and power companies that have projects in the emirate and business ties with its leaders.
Iberdrola last year finished building a new gas-fired power plant in Qatar that has the capacity to generate 2,000 megawatts of electricity.
The plant, for which Iberdrola's construction unit was awarded a US$1.65bn (Dh6.06bn) building contract in 2007, was expected to supply about 40 per cent of power generated in the country of 1.2 million people, according to a statement from Iberdrola last year.
Qatar Holding made a similar deal in December, acquiring 9.1 per cent of Hochtief, Germany's biggest construction company. As with the Iberdrola stake, that deal was also aimed at avoiding a power grab by ACS, Hochtief's largest shareholder. ACS owns more than 36 per cent of Hochtief, according to Bloomberg News, and offered last year to pay 2.8bn to acquire the remainder of the company.
The purchase of the Hochtief stake came under criticism because of the discount Qatar Holding received on the market price. The 5.5 per cent discount Qatar was getting on its Iberdrola shares, however, was not out of line, Mr Perez said.
"It is true that they are paying a discount, but this discount is in line with the discounts offered recently in private placements, and lower than others done in some capital increases," he said.