By: Amr Adel and Ramy Sameeh
Abu Dhabi - Mubasher: The merger of International Petroleum Investment Company (IPIC) and Mubadala Development Company (Mubadala) is a step towards restructuring the investment arms of the Abu Dhabi government, according to analysts and economists.
This step is forecasted to boost investment advantages and economic returns for the emirate, they told Mubasher.
The merger will contribute to creating a new entity with a strong financial position and unified strategy, thus achieving highest possible growth in various sectors including energy, in addition to cutting costs and expenses and enhancing performance.
The Abu Dhabi’s Government Communication Office on Wednesday revealed that the emirate's Crown Prince Sheikh Mohamed bin Zayed has issued a resolution to merge Mubadala and IPIC.
A joint committee, chaired by the UAE's deputy prime minister Sheikh Mansour Bin Zayed Al Nahyan, will be created to oversee the merger. The investment companies will continue to operate independently until the committee concludes its assignment, the office said on its official Twitter account.
The merger is good step towards restructuring the emirate of Abu Dhabi's investment arms and coordinating foreign investments so as to create a strong investment body that will be capable of executing the emirate's vision and upcoming mega projects as part of its economic diversification plans, said Tarek Qaqish, economics analyst and asset manager at Al Mal Capital.
The decision will also bolster the two funds' positions, unify their strategy and remove any duplication in activities, Qaqish told Mubasher via phone.
He explained that this step will also help reduce costs and expenses and enhance performance compared to pre-merger performance.
Mohamed Al-Aasar, head of research at NBK Capital, concurred with Qaqish, noting that the two companies hold massive investments worth billions of dollars.
Al-Aasar said he expects the merger to result in further growth particularly in the energy sector, which represents the two funds' major operations at present.
It is expected that further mergers will be announced in the region in the coming period, Al-Aasar told Mubasher, noting the recent announcement by emirate's First Gulf Bank (FGB) and the National Bank of Abu Dhabi (NBAD), which confirmed a merger plan around two weeks prior.
The two banks aim to establish the largest banking entity in the MENA region, he said.
The decision to merge the two entities will aim to redirect oil revenues towards better investments and diversification of economic sources as well as give a better chance to complete projects and carry out larger expansions, Fady El-Ghattis, CEO of Think for Financial Studies (TFS) told Mubasher in a comment.
IPIC's investments cover an array of over 18 companies in the oil and gas sector. Meanwhile, Mubadala's portfolio of investments and assets exceeds AED 246.42 billion ($67.1 billion).
Translated by: Julian Nabil and Nada Adel Sobhi
