Qatar diversifying investment exposure eastward

The country will continue to be a heavy outbound investor, with Qatari investors being heavily exposed to the European as well as the United States (US) markets. However, notably over the past year Qatari entities have upped their investment allocation to Asia. Sectors of interest are infrastructure, consumer, property, healthcare and financial services.

Qatar has already started to make significant tracks in Asia. In November last year Qatar Investment Authority (QIA) announced a USD10 billion (QAR36.4 billion) joint venture with China’s state-owned CITIC Group to invest in the region. In another deal, the QIA in October 2014 agreed to acquire approximately 19.9 percent of the shares of Hong Kong-listed department store operator Lifestyle International for USD616.6 million (QAR2.2 billion).

Europe has consistently been the most targeted region by deal count for Qatar outbound deal activity since 2010.

Last year saw the highest outbound annual deal count and second highest value going by reported records, with 11 deals worth USD9.9 billion (QAR36 billion) announced. So far, 2015 has been no exception to this trend, with three deals worth USD2.2 billion (QAR8 billion) accounting for total Qatar outbound activity this year.

Qatar has traditionally put great emphasis on the European markets. Qatar’s sovereign wealth fund has a track record of making acquisitions of iconic trophy assets including Harrods and taking stakes in Volkswagen, Sainsbury’s and Porsche as well as football club Paris Saint-Germain and luxury jeweller Tiffany & Co. Interests were also taken in financial giants including Credit Suisse, Barclays, Agricultural Bank of China, Banco Santander Brasil and the London Stock Exchange.

 

New deals

In early May, it was announced that Qatar Airways acquired the Novotel Edinburgh Park Hotel in Scotland, marking the second hotel acquisition by the airline outside of Qatar. Qatar Airways said the acquisition is part of an overall service offering and growth strategy, which is expected to include further hotels in key destinations. Earlier this year, it acquired the Sheraton Skyline Hotel at Heathrow Airport in London.

It has already been reported that Katara Hospitality, the Qatari hospitality player, expects to announce hotel acquisitions this year as part of its strategy to have a portfolio of 60 properties by 2026. Key sought-after international locations are being explored by the company with Katara having a strong presence in Europe and continuing to acquire, develop, and open several hotels across the continent. In January 2015, Katara Hospitality and Fairmont Raffles Hotels International announced they together acquired a 50 percent stake in a joint venture in The Savoy hotel in London from Lloyds Banking Group.

Furthermore, it was reported that Nasser Ahmed Ali A. Al Thani, a Qatari private investor, acquired Turkey’s Kontes Beach Hotel for USD8 million (QAR37.1 million) in February.

To date in 2015, there has been one deal with an undisclosed value targeting Qatar, compared to three inbound deals worth USD2.7 billion (QAR9.8 billion) announced in the same period in 2014, according to reported data.

Last year saw the highest outbound annual deal count and second highest value going by reported records, with 11 deals worth USD9.9 billion (QAR36 billion) announced.

 

Outbound deal value for the whole of 2014 was the second highest annual deal value, with 22 deals valued at USD13.3 billion (QAR48.4 billion). Despite a fluctuating value during the years in between, the 2014 level was more than double the USD5.3 billion-worth (QAR19.3 billion) of deals seen in 2010, with the average deal size increasing from USD438 million (QAR1.6 billion) 2010 to USD606 million (QAR2.2 billion) in 2014.

In the first quarter of 2015, outbound deal value increased by 49.3 percent compared with Q1 2014, with two deals worth USD1.9 billion (QAR6.9 billion) announced. One of these was the acquisition of France-based Vinci by Qatar Holding within the construction sector. As a result of this deal, Qatar was the most acquisitive country in the Middle East by value during Q1 2015, accounting for 46.4 percent of the USD3.9 billion (QAR14.2 billion) total outbound M&A value carried out by Middle Eastern countries.

There is very little M&A activity going on in Qatar domestically and inbound. Most international and regional players tend to establish new entities with local shareholder arrangements and growing organically. Local Qatari companies are also generally reluctant to sell. However, Qatar National Vision 2030, hosting of the 2022 World Cup and government spending are driving M&A and joint ventures in sectors such as construction with the need for local businesses to acquire scale, technology or knowhow. To this end, there could be some activity in healthcare and education.  

Ruth McKee Al Ghamdi is head Middle East and North Africa, Mergermarket in Dubai.