Qatar will buy a 10 per cent stake in Porsche as part of a ?7 billion (Dh36.52bn) deal that will see the debt-ridden luxury sports car maker relinquish some control to an outside investor for the first time. The agreement will also see Porsche set up research and development, and testing facilities in Doha, said Qatar Holding, the investment arm of the Qatar Investment Authority.
Qatar Holding will also acquire most of Porsche's share options in Volkswagen (VW), which it plans to convert into a 17 per cent stake in VW, it said. The Gulf state's investment company will acquire its shares from the Porsche and Piech families and will also provide financing to Porsche by contributing up to ?265 million to its existing syndicated loan facility. The move comes after Porsche, which owns 51 per cent of VW, agreed to sell a 42 per cent stake in itself to VW, representing a dramatic turnaround in events since Porsche made a failed attempt to acquire its rival.
The effort to gain ownership of VW left Porsche with ?10bn of debt, as banks became reluctant to lend more money to the car maker, resulting in the company's chief executive, Wendelin Wiedeking, being ousted last month. The merger of Porsche with VW is expected to be completed in 2011, adding to VW's portfolio of brands, which already includes Skoda, Bentley, Seat, Lamborghini and Audi. This latest deal is part of the small, gas-rich state's strategy to "invest in world-class global companies that benefit Qatar by diversifying our national economy and producing strong and stable long-term financial returns", Sheikh Hamad bin Jassim Al Thani, the prime minister of Qatar, said in a statement yesterday.
As part of its diversification strategy, Qatar Holding last year stepped in to take a stake in the then-troubled British bank Barclays in a deal that now shows a substantial profit on paper, and also invested in Credit Suisse. But this is the first time it has ventured into the car-making sector. Other major investments for Qatar Holding include the British supermarket chain J Sainsbury, Qatar National Bank and the London Stock Exchange.
Ahmad al Sayed, the chief executive of Qatar Holding, said: "As a long-term strategic investor, we believe that the combination of Porsche and VW represents a unique investment opportunity for Qatar Holding and we are pleased to play an integral role in bringing these two companies together. "We look forward to exploring new avenues of co-operation in Qatar in automotive research and related technologies."
Gulf states have made several investments in luxury car makers. The Abu Dhabi Government investment company Mubadala Development has a 5 per cent stake in Ferrari. In March, Aabar Investments, which is majority owned by the Abu Dhabi Government-owned International Petroleum Investment Company (IPIC), bought a 9.1 per cent stake in Daimler for US$2.7bn (Dh9.91bn). Kuwait's Investment Dar owns 50 per cent of Aston Martin.
"Acquisitions of luxury brands is something that is characteristic of the region," said John Sfakianakis, an economist based in Riyadh. These deals were to a certain extent "trophy assets", he said, but Qatar had made a sound investment. "Because of Qatar's surpluses from gas and its low population, they have the ability to invest in this as a future surplus fund," Mr Sfakianakis said. "Porsche has shown over the years that it has excellent results and flexibility, in a country - Germany - that has also shown ability in its auto sector to expand. They are buying into a company that has very good potential for returns, even in a very competitive market going forward."
The Porsche and Piech families, who controlled 100 per cent of the company's voting stock, agreed in late May to get an outside investor on board. Since then, Porsche and the Qatar Investment Authority have been in exclusive talks. Martin Winterkorn, the chief executive of Volkswagen, was also named as chief executive of Porsche last week. firstname.lastname@example.org