After a brief hiatus, Qatar is again eyeing British investment opportunities, with Qatar Investment Authority (QIA) leading the way once more, though perhaps a little more cautiously than on its previous spending sprees.
British supermarket chain Sainsbury's said, on June 25, that Delta (Two), a QIA subsidiary, had upped its stake in the retailer, acquiring a further 7m shares.
QIA's latest swoop on Sainsbury's gave it a 25.3% holding. The move came following the authority's failed $21bn bid to gain control of the chain in November 2007. That bid had been thwarted by turmoil in the credit market and by the controllers of Sainsbury's' pension fund, whose conditions for approving the sale included security for members.
While QIA is now among the largest shareholders in Sainsbury's, there is no guarantee that it will push forward with a bid to gain a majority stake. With the retailer's shares trading at below $6 on June 4 - less than half of their value when the authority made its earlier attempt at a takeover - some analysts have suggested the recent stake acquisitions were aimed at trying to boost Sainsbury's' share price and protect its interests in the chain.
Another analyst hosing down suggestions of a QIA takeover bid was Arif Sherani, the authority's director of investment strategy. Sherani told the international press on July 2 that the retail industry was now a "lower priority" for QIA, with its current focus being on financial services and real estate companies, which had fallen in sales value after the subprime crisis. Proof of QIA's strategy shift came at the end of June, when the authority bought $3.6bn of Barclays Bank shares following a $9bn share placement.
Another investor in the Barclays placing was Qatar Prime Minister, Sheikh Hamad bin Jassim bin Jaber Al Thani, who committed $1.06bn of his own funds to the sale. Sheikh Hamad also serves as the head of QIA as well as property developer Qatari Diar - involved in London real estate development projects, including the planned redevelopment of the 5.2 ha Chelsea barracks site.
Despite QIA's renewed interest in the UK, it hasn't been plain sailing for the $60bn sovereign wealth fund. Earlier this year, the authority cut its ties with British financier Paul Taylor, who had headed QIA's buyout of Four Seasons, one of Britain's biggest care home operators, as well as the Sainsbury's bid. With debts of around $3bn, reductions in health spending by the British government, coupled with falling real estate prices, Qatar's investment in Four Seasons looks far from a winner.
The British media reported in late June that QIA has appointed Ernst & Young to restructure its entire debt-laden healthcare and property portfolio, which along with Four Seasons includes Care Principles and Senad, two specialist care chains, and NHP, a property investment fund that manages care home properties.
The reports, which QIA have neither confirmed nor denied, said the authority had tasked Ernst & Young to develop a plan to turn the ailing investments around, ahead of a possible sale of the holdings.
QIA isn't the only Qatar investor buying into Britain. Qatari firm The First Investor is part of a consortium headed by Investate Realty of Bahrain, which announced on June 29 plans to develop a 1.8 ha waterfront site known as Tideway Industrial Estate in central London. The $750m residential project will occupy one of the last waterfront sites on the Thames open for development, with its investors taking advantage of the 25% fall in London's commercial property prices over the past year to snap up the prime location.
It hasn't all been one-way traffic for Qatari-British investments. UK-based mobile phone giant Vodafone has teamed up with Qatari investors to operate the country's second mobile telecommunications network. Under the terms of the licence, formally granted on June 30, the joint venture is required to pay a $2.1bn fee to the state and offer 40% of the company's shares by the end of the year.
The initial public offering, scheduled for September, will go somewhat beyond the licence requirements, with 40% of shares in Vodafone Qatar to be sold to the public and a further 15% offered to local institutional investors. This will leave Vodafone with a 23% stake in the venture and the Qatar Foundation with 22%.
Though Qatari investors are again buying British, indications are that this time around, the spending spree is more measured. While Qatar's state and private investors have strong financial reserves behind them, fuelled by high gas revenues, the strategy appears to be one of protecting existing interests and consolidating its areas of declared focus.