Saudi Arabia buys $7.7 billion shares in world’s best known companies

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Boeing is the among the global corporate leaders that Saudi Arabia's Public Investment Fund has included as it goes bargain hunting during the current coronavirus pandemic. (AFP)
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Facebook is the among the global corporate leaders that Saudi Arabia's Public Investment Fund has included as it goes bargain hunting during the current coronavirus pandemic. (Reuters)
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Updated 19 May 2020

Saudi Arabia buys $7.7 billion shares in world’s best known companies

  • Bargain-hunting wealth fund invests in Boeing, Facebook, Disney, Starbucks and more

DUBAI: Saudi Arabia’s sovereign wealth fund has gone bargain hunting during the current economic turmoil, snapping up about $7.7 billion worth of shares in some of the best known companies in the world.

The $300 billion Public Investment Fund bought stakes in global corporate leaders such as Boeing, Facebook, Disney, Marriott and Starbucks. It also invested in two big US banks, Citigroup and Bank of America, and took holdings in oil giants BP, Total and Royal Dutch Shell.

Stock market experts said the buying spree reflected confidence on the part of the PIF that companies badly affected by the economic fallout from the COVID-19 pandemic would recover quickly, and their share prices would rise.

“The PIF seems to have taken a view on prices from a long-term perspective. We must assume they bought when they were down on the assumption they’ll go back up,” Tarek Fadlallah, chief executive of Nomura Asset Management in the Middle East, told Arab News.

Explaining its investment rationale, the PIF described itself as “a patient investor with a long-term horizon. As such, we actively seek strategic opportunities both in Saudi Arabia and globally that have strong potential to generate significant long-term returns while further benefiting the people of Saudi Arabia and driving the country’s economic growth.”

FASTFACTS

  • The buying spree reflects confidence on the part of the PIF that companies badly hit by the pandemic would recover quickly, say experts.
  • US stocks lost about 30 per cent of their value in the crash after the global lockdowns began, but have since recovered about half of that decline.

A declaration to the US stock market regulator showed PIF having positions worth about $10 billion in 24 companies. The biggest, worth just over $2 billion, was an already declared holding in taxi app Uber.

The next biggest was an investment in BP,  nearly 34 million shares valued at $827 million, followed by the Boeing stake for $713 million. Facebook and Citigroup stakes were valued at about $521 million each.

The new PIF portfolio has a strong bias toward travel, entertainment and hospitality, with shareholdings in the Marriott hotel chain, the online travel company Booking.com and events promoter Live Nation.

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There is also interest in technology with investments in Cisco, Qualcomm and Broadcom, and in pharmaceuticals via a stake in Pfizer.

One notable smaller purchase was in Berkshire Hathaway, the vehicle of legendary investor Warren Buffet, who recently sold big stakes on a pessimistic view of future valuations. One Saudi banker said: “That’s a cheeky way of PIF telling Buffet that they are more optimistic than him.”

US stocks lost about 30 per cent of their value in the crash after the global lockdowns began, but have since recovered about half of that decline after large-scale fiscal intervention by the federal authorities.


STC postpones its acquisition of Vodafone Egypt for second time

Updated 13 July 2020

STC postpones its acquisition of Vodafone Egypt for second time

  • Kingdom’s largest telecom company says it will need an additional two months to complete the deal

CAIRO: The Saudi Telecom Company (STC), the Kingdom’s largest telecom company, said that it will need an additional two months to complete a deal to purchase a 55 percent stake in Vodafone Egypt.

In January, STC was in agreement to buy the stake for $2.4 billion. In April, it extended the process for 90 days due to logistical challenges stemming from the spread of COVD-19. The company said in a statement that it would extend the period again to September for the same reason.

The Public Investment Fund, the Saudi sovereign wealth fund, owns a majority stake in STC. The ownership of Vodafone Egypt is divided between 55 percent for Vodafone International, which is the target percentage of the Saudi purchase offer, 44.8 percent for Telecom Egypt, and the remaining 0.2 percent for small shareholders.

Telecom Egypt is awaiting the results of Vodafone’s evaluation of the final share price to announce its position on the deal. A Telecom Egypt official stated that the company is still awaiting STC’s position regarding the purchase of the share. If the deal is not completed, it may be presented with its rights to acquire Vodafone’s share, which would allow it to take over 99.8 percent of the company’s shares, leaving 0.2 percent for small investors.

Ashraf El-Wardany, an Egyptian communications expert, pointed out the importance of waiting until the procedures between STC and the Vodafone Group are complete. The results will determine the next steps by Telecom Egypt.

El-Wardany said that the Saudi operator must, after completing the relevant studies, submit a final binding offer at the share price and any conditions for purchase. If approved by Vodafone, it must submit the offer with the same conditions and price to Telecom Egypt, provided that the latter responds within a maximum period of 45 days to determine its position regarding the use of the right of pre-emption and the purchase, or lack thereof, of Vodafone’s share.

According to El-Wardany, there are other possible scenarios. Vodafone International may not be convinced of the offer or the conditions presented by the Saudi side and the sale may be withdrawn, or the Vodafone group may be ready to sell and has prepared another buyer for its stake in Egypt in the event of rejecting the Saudi offer. It may also it back away from the deal and continue to operate in Egypt for a few more years.

El-Wardany said that if Telecom Egypt decides not to use the right of pre-emption to acquire the remaining Vodafone shares for any reason, it will continue with its 44.8 percent stake.
It may also resort to selling all of its shares or part of it to the Saudi side or to any company that wants to acquire its stake.

“This raises the question of whether STC can acquire all of Vodafone’s shares,” El-Wardany said, adding that the coming months “will make the answer clear.”