x Abu Dhabi, UAEWednesday 17 January 2018

Ipic to review $700m German investment over bribery claim

Abu Dhabi's International Petroleum Investment Company is conducting a review of its stake in Germany's Ferrostaal after bribery allegations surfaced at the industrial services giant.

The International Petroleum Investment Company (Ipic) has hired Morgan Stanley to review its US$700 million (Dh2.57 billion) investment in Ferrostaal as the German industrial services group battles a bribery investigation.

Ipic, based in Abu Dhabi, bought 70 per cent of Ferrostaal in 2009 from MAN, the German lorry maker. Ipic and MAN have been locked in a dispute since the bribery allegations surfaced last year, however.

MAN has been trying to exercise an option forcing Ipic to take over the remaining 30 per cent of Ferrostaal, but Ipic has refused. The bribery allegations against Ferrostaal stem from contracts to supply submarines to Greece and Portugal.

"Ipic continues to closely monitor Ferrostaal's operations and financial performance, consistent with its 70 per cent ownership," the company said. "We have asked Morgan Stanley to support our evaluation work, which focuses on the financial and strategic status of Ferrostaal, and avenues through which Ipic can assist the company.

"We hope for and welcome MAN to also participate in its capacity as shareholder, as we have done so over the past two years."

Both Ipic and MAN have said repeatedly they want to put their differences behind them, but have found little common ground since talks began last year. Ipic at first tried to nullify its original purchase of Ferrostaal, and did not accept an offer from MAN to settle the issue.

Ipic advanced a proposal to restart talks in April, but it is unclear where the sides stand now.

The company said five months ago it wanted a "quick and amicable" resolution. "Ipic is confronted with the consequences of a compliance scandal that refers back to the time when Ipic was not at all involved," the company said then.

The allegations about Ferrostaal came as a shock to Germany's stolid business community when they were revealed last year.

German prosecutors alleged in April that former officials at Ferrostaal were paid €62m (Dh307.4m) of bribes between 2000 and 2007. None of them has been convicted of wrongdoing, however.

Morgan Stanley's review of Ferrostaal's business and financial health will include an assessment of whether it can afford to pay fines that may be levied against it in bribery cases, according to Bloomberg News, citing a German newspaper report. The paper said some of Ferrostaal's businesses were under review for closure.

Ipic is owned by the Abu Dhabi Government and has stakes in numerous industrial and energy-related companies across the globe.

The company, which has assets worth almost $50bn, also owns Aabar Investments, which part-owns Daimler, Germany's biggest car maker.