Mubadala Development Company has struck a US$2 billion investment in Brazil - its largest in an emerging market, as the business seeks to grow from less developed countries.
Mubadala strikes $2 billion Brazil deal
Mubadala Development has struck a US$2 billion (Dh7.34bn) investment deal with Brazil's EBX Group as it seeks to benefit from a diversified company with interests in oil and gas, gold and other sectors.
In exchange, Mubadala, a strategic investment company owned by the Abu Dhabi Government, will be granted a 5.6 per cent stake in Centennial Asset Brazilian Equity Fund and other offshore holding companies owned by Eike Batista, the founder of EBX Group.
As part of the agreement, Mubadala will also gain access to a pipeline of future business opportunities, including investments in companies that specialise in technology, fertilizers, and cement - among the materials most often used in fast-developing countries.
"This investment creates an attractive and diversified exposure to an emerging economy and paves the way for healthy financial returns and future collaborations in many areas," said Khaldoon Khalifa Al Mubarak, the chief executive and managing director of Mubadala.
"Brazil's economic fundamentals are strong and the investment prospects in this market for the medium to long-term are attractive."
Since Mubadala was founded in 2002, the company has made most of its investments in developed countries.
But it says it has always viewed emerging markets as the future for its growth.
Mubadala homed in on EBX Group, in part, for its work in similar areas such as oil and gas as well as infrastructure development. It also regards EBX Group's businesses as attractive for the access they provide to the iron ore, gold and coal markets.
EBX Group is made up of five publicly traded companies, as well as some privately held assets. The group said it planned to invest a combined $15.5bn last year and this year, and $50bn in total over the next 10 years.
About two thirds of the world's economic growth is expected to be generated by emerging markets in the next four years, according to a report released last year by the Economist Intelligence Unit on GCC trade and investment flows.
Latin America appeared to have the weakest trade ties with countries in the Gulf, the report noted, although Brazil accounted for 85 per cent of the total trade between the two regions in 2009. A spokesperson for Mubadala said the company viewed its investment in EBX Group as "one of the best ways to engage with the Brazilian market".
For EBX, this marks the first time the company has invited a strategic partner to invest at a holding company level, Mr Batista said.
Mubadala described the money it paid for its equity interest as a "primary investment" and declined to reveal how much more in funding it might pour into EBX Group or other companies in emerging markets.
"Mubadala does not announce investment plans in advance," a spokesman said.
"We view Brazil and other emerging markets as attractive investment geographies, and if additional investments arrive that are in line with our objectives, then we may consider such investments."