STRATEGIC: Qatar Forms A Taste For Foreign Strategic Assets

STRATEGIC: Qatar Forms A Taste For Foreign Strategic Assets

The willingness to target big names in Europe's energy and defense sector illustrate how quickly the seven-year old Qatar Investment Authority, with an estimated $60 to $100 billion in assets, has found confidence says Una Galani

March 15, 2012 4:00 by kippreport

Qatar is developing a taste for strategic or sensitive assets. After eyeing up a shareholding in European aerospace defence firm EADS , the sovereign fund of the gas-rich Gulf state is reported to have built a 2 percent stake worth $2.6 billion in French oil major Total. That’s a poor diversification of Qatar’s hydrocarbon wealth. But it might be an effective way of shoring up influence amongst the country’s gas customers.

The willingness to target big names in Europe’s energy and defense sector illustrate how quickly the seven-year old Qatar Investment Authority, with an estimated $60 to $100 billion in assets, has found confidence. The new focus is a big leap from trophy purchases like luxury department stores or European football teams. But it may push Qatar closer to the point where it may ruffle some political feathers. It was only in 2005 that France blocked a rumored Pepsi bid on Danone, the food company — even though it later didn’t oppose a U.S.-led takeover of a competitor of the yoghurt-maker.

Contrary to many sovereign funds, Qatar has shown that it doesn’t like to be a passive investor. The fund has racked up board seats at German car-makers Volkswagen and Porsche, Credit Suisse bank, and construction firm Vinci. It may also seek to appoint a director at French media-to-aerospace conglomerate Lagardere , in which it holds a 10 percent stake. Belgian billionaire Albert Frere controlled 5.6 percent of Total at the end of 2010, enough to give him a board seat.

Financially, Qatar may well have picked up a bargain with its Total stake, built up over several months. The French group’s shares hit a nine-year low in August last year. Total was trading at around 8 times its 2012 earnings before it released its fourth quarter results last month. That’s a 16 percent discount to global peers, according to Denmark’s Jyske Bank. Qatari oil accounts for 7 percent of Total’s production.

But the investment has a strategic feel about it too. Qatar provides a quarter of the UK’s liquefied natural gas imports and is also selling gas to France. European governments are increasingly looking to the Gulf state to reduce their reliance on the more expensive gas of less politically stable suppliers likeRussia, Algeria or Nigeria. By investing heavily in big strategic European companies, Qatar isn’t doing its economy any harm.

By Una Galani (Editing by Pierre Briançon and Sarah Bailey)