Qatar Scores Coup at Porsche Riding Family Feud to 17% VW Stake
July 24 (Bloomberg) -- Qatar’s ruling emir, who toppled hisfather in a bloodless coup in 1995, has come out on top ofanother power struggle thousands of miles away in Germany, wherethe Porsche dynasty is losing control of the sports-car maker.
Porsche SE yesterday agreed to combine with Volkswagen AGafter a four-year attempt to take over the larger German rivalleft Porsche paralyzed with debt. Qatar will own 17 percent ofVW with options accumulated from Porsche, making the Gulfkingdom the third-largest investor in Europe’s biggest carmaker.
Qatar used its $63 billion sovereign wealth fund to givethe world’s second-richest country behind Liechtensteininvestment clout, snapping up stakes in established brands ortroubled companies in need of cash. Four years after itsinception, the fund has become the biggest shareholder inBarclays Plc, J. Sainsbury Plc and Credit Suisse AG.
“There is an incentive to invest in these known, luxury-sort of top brands,” said Rachel Ziemba, a senior analyst atNew York’s RGE Monitor, which researches sovereign wealth funds.“Rather than investing in a whole number of companies thatmight be harder to keep track of, Qatar’s investment strategy ismore akin to a private equity model.”
Hailed by Germany’s Manager Magazin as “The Saviors fromthe Orient,” Qatar Emir Sheikh Hamad bin Khalifa Al-Thani hastransformed his country of about 1 million citizens into acenter of education and research that include the Arabictelevision network Al Jazeera and local campuses of six U.S.universities.
Sandhurst Education
Born in 1952 and a graduate of the Royal Military Academyin Sandhurst in the U.K., the emir has opened up his country toembrace freedom of press and improved education, and Qatarhosted municipal elections in which women and men participated.
The emir’s wife, Sheikha Mozah bint Nasser Al Missned,heads the Qatar Foundation that fosters education and research.Qatar’s interest in German engineering partly stems from herpersonal preference for Porsche cars, German newspapersFrankfurter Allgemeine Zeitung have reported.
The sheikha wants to use Porsche’s engineering expertise tocomplement a science technology center that she helps oversee aschairman of the Qatar Foundation, she told Germany’s Focusmagazine in June. She recently toured European countriesincluding Germany and France to deepen ties. Spokespeople forthe emir and the Qatari Investment Fund declined to comment.
German Engineering
Porsche sales in Qatar have more than tripled in threeyears to more than 600 units in the last 12 months, according tothe company. Porsches typically adorn the entrances of luxuryhotels or cruise down the six-lane cornice along the crescent-shaped seafront of Doha, the Qatari capital.
“This also reflects our fantastic business development inthe whole region over the last couple of years,” Porschespokesman Michael Baumann said in an e-mail. Porsche ChairmanWolfgang Porsche told workers at a gathering in Stuttgart,Germany today that Porsche will seek to preserve itsindependence and that Porsche’s “myth will never die.”
Qatar emerged as an investor after the carmaker’sunsuccessful bid for Volkswagen created a rift between CEOWendelin Wiedeking and Wolfgang Porsche on the one side, andVolkswagen Chairman Ferdinand Piech on the other.
Wiedeking agreed to step down yesterday, paving the way tointegrate Porsche’s car manufacturing into Volkswagen alongsidebrands such as Audi and Bentley. The Porsche SE holding companywill remain Volkswagen’s biggest shareholder with about 51percent of the shares, while the federal state of Lower Saxonywill own 20 percent. Michael Macht, Porsche’s head ofproduction, will succeed Wiedeking.
British Protectorate
“Porsche appears to be now firmly stuck in the mud unableto have any control over its destiny,” said Howard Wheeldon, asenior strategist at BGC Partners LP in London.
When Porsche was established in the 1930s, Qatar was anisolated British protectorate, without schools or a fullyfunctioning hospital. The country, once dependent on its pearlindustry, began exporting oil after World War II.
By the 1960s, Qatar’s network of paved roads included oneto the west coast oil fields and another south to Qatar’sMesaieed industrial center, said Vahe Halajian, managingdirector of sign maker Qatar Neon Light Co.
“Anywhere else you wanted to go, you had to have four-wheel drive,” said Halajian, a U.S. citizen who first visitedQatar in 1963 when his father opened the sign business in Doha.“I wouldn’t recommend driving a Porsche on the Qatar roads inthe 60s.”
Petroleum Wealth
Gas exports have helped increase Qatar’s gross domesticproduct to $101 billion, or $101,000 for each of the about 1million men, women and children on the thumb-shaped peninsula --among the highest per-capita GDPs in the world.
The Gulf has become a key investor in the German carindustry as cash dwindles amid the worst automotive market indecades. Abu Dhabi’s Aabar Investments PJSC bought 9.1 percentof Daimler AG for 1.95 billion euros in March to become thelargest shareholder in the maker of Mercedes-Benz cars. Kuwaitis its second-largest owner with 6.9 percent.
“Porsche has acquired the reputation of one of the mostrenowned and versatile providers of engineering services theworld over,” Abdelali Haoudi, vice president of research forthe Qatar Foundation, said in a July 21 e-mail. Porsche “istruly a remarkable and an outstanding piece of technology thatQatar as a whole can benefit from.”
‘Significant Role’
The sovereign wealth fund overseen by Prime Minister SheikhHamad bin Jassim bin Jaber Al-Thani was created in 2005 to spendQatar’s surplus generated from petroleum exports. Smaller thanneighboring Abu Dhabi’s $700 billion fund or Norway’s $350billion oil fund, the Qatari fund’s strategy of taking largestakes may help the Gulf state become a more active shareholder.
“I see them as being investors that want to take asignificant role in the management of the companies they aretaking stakes in,” said Ziemba, the RGE Monitor analyst.
Qatar’s overtures haven’t always been welcome. In September2007, the emirate bought 9.98 percent of Swedish stock-marketoperator OMX AB, threatening a bid by Nasdaq Stock Market Inc.and Borse Dubai for the exchange. OMX founder Olof Stenhammarsaid at the time that he didn’t know what Qatar wanted orunderstand its strategy. After forcing the other suitors toraise their price, Qatar left the battle and sold its holding.
Today, Qatar can rely on its status as the world’s biggestliquefied natural gas producer to fuel its investment ambitions,as other sovereign wealth funds retrench. Norway’s fund had itsworst return in its 18-year history in the third quarter, andAbu Dhabi’s fund also lost in value, Ziemba estimates.
For Qatar, there’s no sign the development will slow, asthe kingdom plans to more than double output of liquefiednatural gas by the end of 2010.
Qatar has “a favorable cash flow position because of thedevelopment of the gas fields,” said Brad Setser, an economistat the New York-based Council on Foreign Relations, anindependent institute that studies geopolitics. “It’s in aposition to continue to invest where some other funds are not.”
To contact the reporter on this story:Robert Tuttle in Doha, Qatar, at rtuttle@bloomberg.net.
Last Updated: July 23, 2009 19:01 EDTSource: Bloomberg
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