Sovereign Wealth Fund Weekly News Roundup: SWFs Invest Big in European Infrastructure

April 02, 2015 by Loch Adamson

SWF Weekly News Roundup: ADIA and GIC Eye German Motorway Stations
SWF Weekly News Roundup: Funds Back Duty Free Buyout
SWF Weekly News Roundup: CIC Signs MoU with Steel Firm
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Sovereign wealth funds continue to pour billions into European infrastructure projects, despite rising prices and fierce competition. The $589 billion Abu Dhabi Investment Authority (ADIA) and Singapore's GIC , with $315 billion in assets, for instance, are reportedly involved in a bidding war for German motorway station group Autobahn Tank & Rast. British private equity firm Terra Firma Capital Partners bought the Bonn-based company, which operates 350 gas stations and 390 service stations, in 2004 for €1.1 billion (then $1.4 billion) and now hopes to sell the company for €3.5 billion ($3.8 billion).  

ADIA is said to have joined a consortium alongside Münich-based insurers Allianz Group and Münich Re, and Borealis, the infrastructure unit of the Ontario Municipal Employees Retirement System. GIC is said to be teaming up with Canada's Public Sector Pension Investment Board, better known as PSP Investments, and Ontario Teachers' Pension Plan, to submit a rival bid.

In Spain, meanwhile, the $548 billion Kuwait Investment Authority (KIA) is set to invest in Barcelona–based energy company Gas Natural Fenosa's international unit Global Power Generation (GPG), which focuses on natural gas distribution networks in Asia and Latin America. According to a statement issued by Gas Natural on Monday, KIA’s Wren House Infrastructure Management will buy a 25 percent stake in GPG for $550 million. 

In the U.K., a Middle Eastern sovereign wealth fund has invested alongside British pension funds in a new investment vehicle that will finance the development of British offshore wind farms. The U.K. Green Investment Bank (GIB), which was set up by the U.K. government in 2012 to attract foreign and private investment to renewable energy projects, raised £463 million ($683.5 million) for the new fund, including £200 million of its own capital. GIB did not reveal the names of the investors — but press reports suggest ADIA may be the sovereign wealth fund involved.

Temasek Buys More London Real Estate

Singapore's state-owned investor Temasek Holdings, with $177.2 billion in assets, is part of a Singaporean–Malaysian consortium that has acquired the Bankside Quarter residential scheme on London's South Bank for £308 million. The other members of the investor group buying the scheme from Washington, D.C.–based private equity firm Carlyle Group are Hotel Properties, run by the Singaporean tycoon Ong Beng Seng and Amcorp Properties, whose executive chairman, Azman Hashim, is one of Malaysia’s richest men. Temasek, Hotel Properties and Amcorp will each own 30 percent of the development, with the remaining 10 percent being held by London–based developer Native Land. 

SWFs Back Duty Free Buyout

Also this week, Temasek teamed up with two other sovereign funds to back Swiss duty free retail operator Dufry’s €2.6 billion acquisition of Milan–based rival World Duty Free. Dufry will raise at least €2.1 billion through a rights issue of new stock, to which Temasek, GIC and the Qatar Investment Authority (QIA), with an estimated $304 billion in assets, will each commit 450 million Swiss francs ($467 million). The Basel–based company will also raise up to €1.5 billion via long-term debt instruments. Dufry expects that the details of the rights issue will be approved by a general shareholder meeting, to be held by May 15.

KIC Eyes Trophy Investments

The $72 billion Korea Investment Corp. (KIC) is reportedly willing to invest up to 1.5 trillion Korean won ($1.36 billion) in three five-star hotels owned by Riyadh-based Kingdom Holding Co., the conglomerate controlled by Saudi Arabian Prince al-Waleed bin Talal al-Saud. Earlier this month KIC signed a memorandum of understanding with Kingdom Holding Co. to identify and exchange information on global private equity opportunities. This will be the second hotel deal Kingdom Holding has done with a sovereign wealth fund in the last few months. In December the company sold London’s Savoy Hotel to Katara Hospitality, the hotel operating arm of QIA.

KIC is also reported to be in talks to buy a 19 percent stake in the Los Angeles Dodgers, the Major League Baseball team. KIC is negotiating to buy the stake from New York–based investment firm Guggenheim Partners for around $361.9 million, according to the official Yonhap news agency. KIC is also reportedly eyeing stakes in European football teams.

CIC Signs Agreement with Steel Firm

The $652.7 billion China Investment Corp. (CIC) has signed a memorandum of understanding with Hebei Iron and Steel Group, China's second-largest steel mill company. Under the terms of the memorandum, the two parties will share knowledge and resources to develop overseas steel projects. The first deal under the agreement will involve the steel maker's planned steel mill in South Africa, which will produce five million metric tons mostly of construction steel when completed in 2019. 

The Chinese sovereign wealth fund has recently been scouting for investment opportunities  in sub-Saharan Africa and will often invest in commodities producers as it seeks to diversify China's foreign exchange reserves.

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