- The Saudi fund bought almost 17% of the company from Prince Alwaleed
- Sovereign fund likely to be an active investor – sources
- PIF can benefit from Alwaleed’s investment style: analysts
DUBAI – June 15 (Reuters) – The prince, who is the international face of Saudi business, may no longer be able to mark everything.
For years, Prince Alwaleed bin Talal, the self-proclaimed Warren Buffett of Saudi Arabia, has earned hundreds of millions of dollars by investing in companies from Citigroup (CN) to Uber (UBER.N) and Twitter (TWTR.N ) with almost total autonomy. .
Its investment firm Kingdom Holding (4280.SE) now has Saudi Arabia’s Public Investment Fund (PIF) as a minority shareholder and the powerful sovereign wealth fund is unlikely to be sidelined, they said. sources familiar with the matter.
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The Heritage Fund, which is at the heart of Crown Prince Mohammed bin Salman’s ambitious plan to diversify the Saudi economy, wants Kingdom Holding’s investment committee to have more decision-making power than in the past. two sources familiar with Kingdom’s business told Reuters.
“(PIF) will want to be an active investor,” said a Gulf sovereign wealth investor. “Kingdom Holding’s investment committee is essentially Alwaleed, and I can’t imagine the PIF being at the prince’s whim.”
PIF, Kingdom Holding, Prince Alwaleed and his spokesman declined to comment when Reuters contacted PIF’s minority stake for future investments.
Alwaleed, 67, had long held Kingdom shares, holding nearly 5% of the stock on the Saudi stock exchange until PIF bought a 16.87% stake for $ 1.5 billion last month.
The deal came more than four years after Prince Alwaleed was dragged into an anti-corruption campaign ordered by the Crown Prince and detained for nearly three months at Riyadh’s Ritz-Carlton along with dozens of members of the royal family, senior officials and entrepreneurs.
Most of the detainees were released after reaching financial agreements and Prince Alwaleed said in March 2018 that he had reached a confidential and secret agreement with the government.
It was unclear whether the purchase of the PIF was related to the settlement. A spokesman for Prince Alwaleed, the grandson of Saudi Arabia’s first king Abdulaziz and Lebanon’s prime minister, Riyadh Al Solh, said it was a purely commercial deal.
The PIF deal has been reached at the lowest share price of Kingdom Holding this year, with no premium. Bankers who normally work with PIF or Alwaleed did not commit to the deal, two sources familiar with the matter said.
“Change Orientation”
The Saudi state took direct control shares in the businesses of some Saudi businessmen arrested in 2017, including the construction group Binladen and media company MBC, as part of the agreements that led to their release.
Analysts said, however, that the intervention in Kingdom Holding marked a change in strategy on the part of the Saudi government, as the remaining holdings were held by the Ministry of Finance (MoF) instead of the equity fund.
“It’s an indication of a change of direction,” said James Swanston, an economist in the Middle East and North Africa at Capital Economics. “With PIF having the stake, it can now be seen more as an investment opportunity.”
The role of the PIF is to get enough revenue through investments to develop new sectors in the Saudi economy, while the Ministry of Finance is more the guardian of daily spending and is much less strategic or interested in risk, said Jim Krane. researcher. at the Baker Institute at Rice University.
Alwaleed’s investment style has focused on new opportunities that could be very lucrative but risky, as well as look at undervalued assets, said one of Kingdom’s knowledgeable business sources.
“The PIF is basically buying a stake in Prince Alwaleed’s successful investment history. As long as Alwaleed proves he can still pick winners, the Saudis will benefit,” said Jim Krane, author of Energy Kingdoms: Oil and Political Survival. in the Persian Gulf “. . “
Alwaleed gained international prominence after making a big hit for Citigroup in the 1990s and was one of Apple’s first investors (AAPL.O).
The Prince and Kingdom also made a $ 300 million joint venture on Twitter in 2011 and increased their stake in 2015. Last month, they agreed to incorporate a $ 1,890 million stake in the agreement. acquisition of Elon Musk, instead of charging.
SUCCESSION
While the PIF move may affect Prince Alwaleed’s room for maneuver, Kingdom Holding will benefit from the sovereign fund’s political and financial influence when it comes to trading, the two sources close to Kingdom said.
Since becoming a more active investor in 2015, the sovereign wealth fund has taken bold steps to raise its profile in the business and sports world.
It needed a $ 3.5 billion stake in Uber before its listing, invested $ 45 billion in Softbank’s inaugural technology fund, bought 80% of British football club Newcastle United last year and has altered the world of golf with its new LIV league.
The PIF now manages more than $ 600 billion in assets, although its investment history has been mixed.
It made big profits by investing in electric vehicle maker Lucid (LCID.O) before trading, but its investment in Softbank has been more volatile as rising rates and geopolitical instability hit technology stocks. high growth.
The wealth fund is supporting the Crown Prince’s megaprojects in his Vision 2030 economic diversification plan.
Real estate consultant Knight Frank estimates that projects to develop Saudi Arabia’s nascent tourism industry and other sectors, including the construction of a large futuristic green city called NEOM for $ 500 billion, are worth more than $ 1 trillion. dollars.
But Riyadh has struggled to attract as many foreign investors as expected, and the PIF could benefit from Alwaleed’s relationships with key players in the hotel industry through its participation in Four Seasons, as well as Fairmont, Raffles and Swissotel.
Despite its high profile image, Alwaleed has remained close to its roots. He often goes into the Saudi desert, where he spends time with guests and meets members of the tribe and their families.
The fact that his son Khaled bin Alwaleed has forged his own path, investing in technology, real estate, food manufacturing and vegan chains through his KBW Ventures and KBW Investments, has raised the issue of succession, they said. three sources.
A source in the financial world said that PIF could nominate a candidate to be prepared by the prince as his successor.
“Three the prince out of the equation, and it’s just a Saudi investment holding company,” the person said. “I don’t think many of these deals would have been made without him.”
($ 1 = $ 3.7518)
(This story is added again to add dropped words to paragraph 27)
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Report by Hadeel al Sayegh and Saeed Azhar; Edited by David Clarke
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