Aabar Investments is poised to become the biggest shareholder in the troubled Italian bank UniCredit after the Abu Dhabi Government-owned investment company said it would boost its stake in the lender to 6.5 per cent.
The increase is part of a rights issue that UniCredit launched this month, offering investors additional shares at a steep discount to the prevailing price at the time of the announcement.
"We are intending to participate in the rights increase and actively support UniCredit's management and franchise in the future," said Khadem Al Qubaisi, the chairman of Aabar, in a statement yesterday. "We intend to remain one of the largest shareholders of UniCredit post its rights issue." The statement sent the stock rising.
Morgan Stanley is acting on behalf of Aabar in lifting its stake. UniCredit is raising €7.5 billion (Dh35.2bn) via the rights issue to help to shore up its weak balance sheet, suffering under deteriorating economic conditions in the euro zone and feeble growth in Italy.
The bank is also cutting costs, reducing staff to strengthen its finances and raising capital to comply with regulatory rules in Europe. It reported a third-quarter loss of €10.6bn last year.
Rights issues are often viewed negatively by investors because their holdings in the company are diluted if they do not take up the offer to buy more shares.
UniCredit investors are being offered two new shares for €1.94 each for every one they already hold.
The offer is a 43 per cent discount to UniCredit's share price before the announcement of the rights issue was made on January 3. The bank's shares plunged by as much as 32 per cent in the days following the announcement.
"We believe in the fundamental value of the bank and its importance in the Italian and European context. This additional investment in UniCredit further reiterates our support to the bank and its management in successfully navigating through current market uncertainty," said Mr Al Qubaisi yesterday.
"It is our belief that the success of the current rights issue will help strengthen UniCredit's capital base and bring with it a more positive outlook for the future."
The announcement helped UniCredit's shares to rise more than 2.6 per cent in late afternoon trading yesterday.
Aabar Investments originally acquired a 4.99 per cent stake in the Italian bank for US$2.3bn (Dh8.4bn) in 2010.
Aabar is majority owned by the International Petroleum Investment Company and invests in various sectors.
The Abu Dhabi company is also the biggest shareholder in Daimler, which makes Mercedes-Benz cars, with a 9.1 per cent holding.