The Supervisory Board of Porsche, the German car manufacturer, announced on July 23 that a new management team will finalize negotiations with Qatar Holding LLC (QH) on a capital investment estimated to be between 7-10 billion USD. If Porsche is integrated into its partner Volkswagen, Qatar would be the third largest shareholder in the company with 17%.
Question: What can we say about the scale of Qatar's potential investment in Porsche?
Behrendt: If we are to assume that Qatar really steps up to the plate and invests anything between 7-10 billion USD into Porsche it could become an important stakeholder in the German automotive industry, and thereby a relevant player in the global automotive industry.
For the time being Qatar has mainly invested in British compaines like J Sainsbury, Barclays, or the London Stock Exchange. It is also a major shareholder of Credit Suisse, the Swiss financial institution. With the investment into a German car manufacturer, it would further raise its profile as an investor to be reckoned with on the global scene.
Question: What does the investment mean in terms of the ability of SWFs, particularly those from the Arab world, to play a bigger role in the global economy?
Behrendt: The size of the investment could be remarkable in a number of ways.
First, to my knowledge, if the numbers turn out to be valid, Qatar’s investment in Porsche could become one of the single biggest equity acquisitions of an Arab sovereign investor in a foreign company. The other case in which an Arab SWF has placed such a large investment is the Abu Dhabi Investment Authority’s (ADIA) investment in Citigroup for 7.5 billion USD some 18 months ago.
Second, Qatar could single-handedly double the total equity holdings of Arab sovereign investors in Germany. We can assume that Arab SWFs currently have around 10 billion USD invested in German companies. The next largest investments were made by Aabar Investments PJSC for 2.7 billion USD in Daimler some months ago, and a 1.8 billion USD investment by the Dubai International Financial Center in Deutsche Bank in 2007.
Third, it would be a fairly sizable investment for Qatar Investment Authority (QIA), the holding company of QH. It is estimated that the value of QIA’s assets amounts to something around 50-60 billion USD. To expose up to 20% of its portfolio to one single equity investment is quite risky. We must assume that Qatar expects more from this investment than only financial returns.
Question: What about the politics of the deal?
Behrendt: Qatar has been very courageous in engaging in conversations with Porsche, and subsequently Volkswagen. Qatar has basically entered the heartland of German industry, which is the key driver of the German economy. One can imagine that any outside investor will have to be very agile to maneuver through the politics and interests of various German stakeholders.
But overall, in the end it appears that these kinds of investments should have a stabilizing effect on the political relations between the West and the Arab world. If we see more cross-border investments like these, I would assume that this can translate into more robust relations. Some commentators have specifically argued that Qatar's investment will also strengthen ties between the Emirates and Germany. This is far cry from the suspicion and criticism that Arab SWFs attracted in Europe and elsewhere only 12 months ago.
Question: We have recently seen a number of initiatives by Western political leaders to attract the interest of Arab SWFs in their economies? What do you make of that?
Behrendt: Qatar's talks with Porsche attracted the attention of German policy makers, and there have been further political talks on issues regarding the involvement of Volkswagen in the deal.
So, we can witness a very interesting phenomenon: Policy makers who only 18 months ago identified SWFs from the Arab region and elsewhere as a major threat to national security and economic competitiveness, are now actively reaching out to them. Back then they argued that political considerations may not drive the investment decisions of Arab sovereign investors; today, they use their political influence to attract them.