Home Hotel industry The Saudi king of investment who no longer governs alone

The Saudi king of investment who no longer governs alone

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  • The Saudi fund bought nearly 17% of Prince Alwaleed’s company
  • Sovereign wealth fund likely to be an active investor – sources
  • PIF could benefit from Alwaleed’s investment style – analysts

DUBAI, June 15 (Reuters) – The prince who is the international face of Saudi affairs may no longer be able to make all the decisions.

For years, Prince Alwaleed bin Talal, the so-called Saudi Warren Buffett, has earned hundreds of millions of dollars investing in companies ranging from Citigroup (CN) to Uber (UBER.N) to Twitter (TWTR .N) with almost complete autonomy. .

Now his investment company Kingdom Holding (4280.SE) has Saudi Arabia’s Public Investment Fund (PIF) as a minority shareholder and the powerful sovereign wealth fund is unlikely to stay away, sources close to the media said. case.

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The wealth fund, which is at the heart of Crown Prince Mohammad bin Salman’s ambitious plan to diversify the Saudi economy, will want Kingdom Holding’s investment committee to have more decision-making power than in the past, have said. two sources with knowledge of Kingdom’s affairs told Reuters.

“(PIF) will want to be an active investor,” said one Gulf sovereign wealth fund investor. “Kingdom Holding’s investment committee is basically Alwaleed, and I can’t imagine the PIF being at the whim of the prince.”

PIF, Kingdom Holding, Prince Alwaleed and his spokesman all declined to comment when contacted by Reuters on what PIF’s minority stake would mean for future investments.

Alwaleed, 67, had long kept a grip on Kingdom shares, holding all but 5% traded on the Saudi stock market until PIF bought a 16.87% stake for $1.5 billion the month last.

The deal came more than four years after Prince Alwaleed was embroiled in an anti-corruption campaign ordered by the Crown Prince and detained for nearly three months at the Ritz-Carlton in Riyadh along with dozens of senior royals. , senior officials and businessmen.

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 if the purchase of the PIF was related to the settlement. A spokesman for Prince Alwaleed, grandson of Saudi Arabia’s first king Abdulaziz and Lebanon’s first prime minister Riad Al Solh, said it was purely a trade deal.

The PIF deal was struck at Kingdom Holding’s lowest share price this year, with no premium. Bankers who usually work with the PIF or Alwaleed were not hired for the deal, two sources familiar with the matter said.

‘CHANGE OF TACK’

The Saudi state has taken direct majority stakes in the businesses of some Saudi entrepreneurs detained in 2017, including construction group Binladen and media company MBC, as part of settlements securing their release.

Analysts, however, said the intervention in Kingdom Holding marked a shift in strategy by the Saudi government, with the other stakes being held by the Ministry of Finance (MoF) rather than the wealth fund.

“It’s an indication of a change in direction,” said James Swanston, Middle East and North Africa economist at Capital Economics. “With PIF now owning the stake, this can now be viewed more as an investment opportunity.”

The role of the PIF is to earn enough revenue through investments to develop new sectors in the Saudi economy while the Ministry of Finance is more the custodian of day-to-day spending and is much less strategic or risk-interested, said Jim Krane, researcher. at Rice University’s Baker Institute.

Alwaleed’s investment style has focused on new opportunities that could be very lucrative but carry risk, as well as undervalued assets, one of the sources with knowledge of Kingdom’s business said.

“The PIF is essentially buying a stake in Prince Alwaleed’s successful investment track record. As long as Alwaleed demonstrates that 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 rose to international prominence after making a successful big bet on Citigroup in the 1990s and he was an early investor in Apple (AAPL.O).

The prince and the kingdom also jointly invested $300 million in Twitter in 2011 and he increased his stake in 2015. Last month he agreed to pay a stake worth $1.89 billion in the buyout deal from Elon Musk, rather than cashing in.

SUCCESSION

While PIF’s decision could affect Prince Alwaleed’s room for maneuver, Kingdom Holding will benefit from the political and financial clout of the sovereign wealth fund when it comes to negotiations, the two sources close to Kingdom said.

Since becoming a more active investor in 2015, the sovereign wealth fund has taken bold steps to increase its visibility in the business and sports worlds.

He took a $3.5 billion stake in Uber ahead of its IPO, invested $45 billion in Softbank’s inaugural tech fund, bought 80% of British soccer club Newcastle United last year and has turned the world of golf upside down with its new LIV league.

The PIF now manages more than $600 billion in assets, although its investment record has been mixed.

He made a huge profit investing in electric vehicle maker Lucid (LCID.O) before its listing, but his investment in Softbank has been more volatile as rising rates and geopolitical instability whipped tech stocks to high increase.

The wealth fund supports the Crown Prince’s megaprojects in his Vision 2030 economic diversification plan.

Real estate consultant Knight Frank estimates that plans to develop Saudi Arabia’s nascent tourism industry and other sectors, including the construction of a sprawling, futuristic green city called NEOM for $500 billion, are worth more than 1 trillion dollars.

But Riyadh has struggled with as many foreign investors as hoped and the PIF could benefit from Alwaleed’s relationships with key players in the hospitality industry through stakes in Four Seasons as well as the Fairmont, Raffles and Swissotel chains.

Despite his high-profile image, Alwaleed has remained close to his roots. He often travels deep into the Saudi desert, where he spends time with guests and meets tribesmen and their families.

The fact that his son Khaled bin Alwaleed forged his own path, investing in technology, real estate, food manufacturing and vegan chains through his KBW Ventures and KBW Investments, raised the question of succession. , said three sources.

A source from the financial world said that PIF could propose a candidate who would be prepared by the prince as a successor.

“You take 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 happened without him.”

($1 = 3.7518 riyals)

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Reporting by Hadeel al Sayegh and Saeed Azhar; Editing by David Clarke

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