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Saudi Telecom Co. is taking a nearly 10% stake in Spain’s Telefonica SA for roughly $2.25 billion as the struggling Madrid-based phone carrier prepares to lay out a new strategy for future growth.
The Saudi government-controlled company purchased about 569.3 million shares and is using financial instruments that will altogether hand it a 9.9% interest in Telefonica once approved by regulators, according to a filing posted late Tuesday. The transaction was funded with a combination of the company’s own resources and bank debt, according to the company. Telefonica was up 1.7% at $4.17 on the news at 3:31 p.m. in New York.
The acquisition is bound to draw scrutiny from the Spanish government, which views Telefonica as a company of strategic importance, operating infrastructure that is critical to the nation’s defenses. Stake acquisitions of more than 5% may require approval from the the country’s cabinet. The carrier has long counted two Spanish banks, CaixaBank SA and Banco Bilbao Vizcaya Argentaria SA, as its anchor investors, and they altogether own less than 10% of the company.
Saudi Telecom made clear in a statement that it doesn’t plan to gain control or take on a majority stake in Telefonica. “We see this as a compelling investment opportunity to use our strong balance sheet whilst maintaining our dividend policy,” it said.
Dubai Holding, the investment vehicle of Dubai's ruler Sheikh Mohammed bin Rashid Al Maktoum, is weighing the sale of its minority stake in Azadea Group, which operates Inditex (ITX.MC) franchises in the Middle East including Zara, three people with knowledge of the matter told Reuters.
Dubai Holding has selected JPMorgan (JPM.N) and Rothschild & Co (ROTH.PA) to advise on the sale of a 25% stake it owns in Beirut-headquartered Azadea, said two of the sources, who declined to be named as the matter is not public.
Talks are at an early stages and no final decision has been made, all three sources said, adding it was too early to comment on valuation. Azadea was valued at more than $1 billion when Dubai Holding bought the 25% stake in 2018, one of the people said.
The sale may start next year and is set to attract interest from sovereign wealth funds, one of the people said, given a booming Middle East consumer sector as a predominantly young population spends its increasing wealth.
Saudi Arabia and Russia prolonged their unilateral oil supply curbs by another three months, a more aggressive move than traders had been expecting as the OPEC+ members seek to support a fragile global market.
The leader of the Organization of Petroleum Exporting Countries will continue its production cutback of 1 million barrels a day until December, according to a statement published by the state Saudi Press Agency on Tuesday. The move will hold output at about 9 million barrels a day — the lowest level in several years — for six months in total.
Russia’s export reduction of 300,000 barrels a day will be extended for the same duration, Deputy Prime Minister Alexander Novak said in a separate statement.
“This voluntary cut decision will be reviewed monthly to consider deepening the cut or increasing production,” according to the statement published by SPA. Saudi Arabia is aiming to support “the stability and balance of oil markets.”
Stock markets in the Gulf ended lower on Tuesday, tracking a decline in oil prices as weak services activity data from China stoked concerns about the recovery in the world's second-largest economy.
Crude prices — a key catalyst for the Gulf's financial markets — slipped 0.6% with Brent trading at $88.44 a barrel by 1200 GMT.
A private-sector survey showed on Tuesday that China's services activity expanded at its slowest pace in eight months in August, as weak demand continued to dog the world's biggest oil importer.
In Abu Dhabi, the index (.FTFADGI) dropped for a third consecutive session, ending 0.9% lower, weighed down by a 0.9% drop in conglomerate International Holding Company (IHC.AD) and a 1.3% decline in Multiply Group (MULTIPLY.AD).
The UAE's largest lender, First Abu Dhabi Bank (FAB.AD), slumped 1.8% and Abu Dhabi Islamic Bank (ADIB.AD) lost 1.1%.
The Qatari index (.QSI) extended its losing streak to a fifth straight session, closing 0.6% lower with most sectors in the red.
Qatar National Bank (QNBK.QA), the region's largest lender declined 1.6% while Qatar Gas Transport (QGTS.QA) dropped 3.3%.
Dubai's benchmark index (.DFMGI) fell for a second consecutive session, down 0.4%, with all sectors in the negative territory.
Tolls operator Salik (SALIK.DU) lost 1.5% and National Central Cooling Co (TABR.DU) slumped 4.1%.
The emirate's largest lender, Emirates NBD (ENBD.DU), slipped 1.2%.
Saudi Arabia's benchmark index (.TASI) lost 0.2%, extending its losses to a fourth consecutive session with oil major Saudi Aramco (2222.SE) falling 0.6% and Saudi National Bank(1180.SE) shedding 1%.
Outside the Gulf, Egypt's blue-chip index (.EGX30) rose 0.7%, extending its gains to a second session with Commercial International Bank (COMI.CA) adding 1.5% and Eastern Co (EAST.CA) surging 7.3%.
Egypt's main tobacco products maker Eastern reported a 90.1% surge in full-year net profit with revenue also increasing from a year earlier.
Growth in non-oil business activity in the United Arab Emirates eased in August to the slowest pace in six months, but business confidence rose to its highest since before the pandemic, a survey showed on Tuesday.
The seasonally adjusted S&P Global UAE Purchasing Managers' Index slowed to a reading of 55.0 in August from 56.0 in July. That was its lowest level since February, although it remained well above the 50.0 mark indicating growth in activity.
The output subindex indicated continued strong expansion in activity although it slowed to 61.9 in August from 62.8 the previous month and was the lowest since January.
David Owen, senior economist at S&P Global Market Intelligence said that while the improvement in operating conditions was sustained in August, momentum has waned since the four-year peak hit in June.
"That said, most PMI indicators continued to give positive signals, including uplifts in input purchases, inventory building, job creation and improving supply chain conditions," Owen said.
The expansion in non-oil business activity in Saudi Arabia, the world's top oil exporter, eased further in August after output growth slowed sharply, a business survey showed on Tuesday, as concerns over market competition weighed on confidence.
The seasonally adjusted Riyad Bank Saudi Arabia Purchasing Managers' Index fell for a second consecutive month, dropping to 56.6 from 57.7 in July, although remaining firmly in growth territory. It was the lowest reading since September 2022.
Overall output growth slowed sharply, with the subindex dropping to 59.1 - the lowest level since January last year - from July's 66.0, while the new business expansion also eased.
The subindex for new orders slipped almost three points to 60.2 with greater competition and weaker export sales weighing on new business, the survey said.
Oil production cuts and lower crude prices this year will temper Saudi Arabia's economic growth, which hit 8.7% in 2022, but non-oil growth is expected to support the economy as it seeks to diversify away from hydrocarbons and expand the private sector.
As Gulf oil wealth flows to all corners of the globe — backing mega mergers, propping up economies and upending the world of sport — moves by a key member of Abu Dhabi’s ruling family have positioned him as one of the world’s most influential dealmakers.
Over the past few months, Sheikh Tahnoon bin Zayed Al Nahyan has gained control of the largest sovereign wealth fund in the United Arab Emirates, expanding the assets he oversees to almost $1.5 trillion. He’s proceeded to bankroll billions of dollars in deals via an expanded empire of private and state entities. Drawing in titans of finance such as Rajeev Misra and billionaire Ray Dalio, Sheikh Tahnoon — one of Abu Dhabi’s two deputy rulers, the UAE’s national security adviser and brother to its president — has sought to invest in everything from technology to finance, with varying degrees of success.
Known to be a fan of Brazilian jiu-jitsu, cycling and chess, Sheikh Tahnoon now helms two wealth funds, the region’s most important private investment firm, the country’s largest lender and its biggest listed corporate. That’s made him the defacto business chief of the wealthy Al Nahyan family, with access to seemingly endless reserves of cash in OPEC’s third-largest producer — an unusual amount of financial firepower even in the oil-rich Persian Gulf.
Sheikh Tahnoon bin Zayed Al NahyanPhotographer: Atta Kenare/Getty Images
Born in the late 1960s — a few years after oil was discovered in Abu Dhabi and when the UAE was still a backwater populated by fewer than 250,000 people compared with close to 10 million now — Sheikh Tahnoon is increasingly becoming the face of his country’s global aspirations.
“The UAE leadership has recognized its most important source of statecraft is financial,” said Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy. “It has the economic means to secure itself, to project power and to shape the politics around it in ways that it could never achieve with its small size or military power alone.”
Most stock markets in the Gulf dropped in early trade on Tuesday, tracking oil prices lower as weak service sector data revived worries over China's fragile post-pandemic economy.
Crude prices - a key catalyst for the Gulf's financial markets — fell 0.33% with Brent trading at $88.71 a barrel by 0700 GMT.
A private sector survey showed on Tuesday that China's services activity expanded at the slowest pace in eight months in August as weak demand continued to dog the world's second largest economy.
In Abu Dhabi, the benchmark stock index (.FTFADGI) was off 0.8%, dragged down by a 2.5% loss in Abu Dhabi Islamic Bank (ADIB.AD) and 1% decline in ADNOC Drilling(ADNOCDRILL.AD).
First Abu Dhabi Bank (FAB.AD), the largest lender in the United Arab Emirates, slumped 2.4%.
In Qatar, the benchmark (.QSI) fell 0.5%, with Qatar Islamic Bank (QISB.QA) sliding 1.3% and the Gulf's largest lender Qatar National Bank (QNBK.QA) shedding 1.1%.
Dubai's benchmark stock index (.DFMGI) dropped 0.3% in early trade, weighed down by losses in most sectors, with Union Properties (UPRO.DU) slipping 2.2% and the Emirates Integrated Telecommunications (DU.DU) dropping 1.3%.
The emirate's largest lender Emirates NBD (ENBD.DU) and UAE's biggest Sharia-compliant lender by assets, Dubai Islamic Bank (DISB.DU), both lost 0.9%.
Saudi Arabia's benchmark stock index (.TASI) fell 0.1% with Oil giant Aramco (2222.SE) shedding 0.2% and Dr Sulaiman Al-Habib Medical Services (4013.SE) sliding 0.4%.
The world's largest Islamic Bank by assets, Al Rajhi Bank (1120.SE), lost 0.3% and Saudi Arabian Mining (1211.SE) slipped 0.9%.
