Qatar arrives late but still makes its mark

Qatar arrives late but still makes its mark
By Simeon Kerr in Dubai and Jim Pickard in London

Published: April 26 2007 03:00 | Last updated: April 26 2007 03:00

Last night Three Delta stayed silent about its raid on J Sainsbury but there were few doubts that the Qatari-backed investment group was the mystery buyer of 14 per cent of the supermarket chain.

It is the second big Arab investment in a UK blue-chip company in a week - following the purchase of 3 per cent of HSBC by Maan Abdulwahed al-Sanea, the Saudi businessman.

Qatar is a late entrant into the global investment scene compared with its Gulf peers. But it is making up for lost time, backed by the income from its huge gas reserves.

Only two years ago the state set up the Qatar Investment Authority, a $40bn (£20bn) state-run investment agency that aims to turnpetrodollars into overseas assets, in a bid to help reduce the tiny peninsula state's reliance on energy revenues.

The QIA will come onto bankers' radars more and more frequently, say analysts.

"Qatar is a relative newcomer - it invested heavily in the gas industry in the 1990s and is now yielding the results of that strategy," says Simon Williams, an economist with HSBC in Dubai. "But they are increasingly ambitious and innovative in how to deploy their surpluses."

As such, it is seeking to replicate the success of similar state-backed investment bodies in Singapore, Abu Dhabi and elsewhere. Singapore's GIC is one of the world's biggest real estate investors.

Investments by the QIA have included a $205m stake in the Industrial & Commercial Bank of China. The group is said to be interested in further pre-initial public offering investments in China, a key market for Qatar's gas exports.

At the forefront of the drive is Sheikh Hamad bin Jaber al Thani, foreign minister and head of the QIA.

Last summer the sheikh set up UK-based Three Delta, an investment group, mostly with QIA cash but also some of his own money.

The business rapidly made several purchases including the £1.4bn acquisition of nursing home operator Four Seasons and the £150m acquisition of Senad, the special needs schools group. The QIA, meanwhile, took an unsuccessful £8bn tilt at Thames Water.

This February the same group bought a 1 per cent stake in J Sainsbury through a separate vehicle, Delta Two.

Sheikh Hamad, one of the key power brokers in the royal family in Qatar, is a softly-spoken man who during his 15 years at the foreign ministry has overseen closer diplomatic and military co-operation with the US, while at the same time having to deal with thediplomatic fall-out from Qatar-funded Arab satellite channel Al Jazeera, whose methods have irritated American and Arab sensibilities alike.

But his economic clout is perhaps even more far-reaching.

Sheikh Hamad's cousin, the ruler, is said to joke: "I may run the country, but he owns it."

In Britain, the sheikh is the financial backer of London's most expensive block of flats at One Hyde Park in Knightsbridge, which is being overseen by development managers Candy & Candy. Separately, a consortium of Candy & Candy and Qatari Diar - which is chaired by the sheikh - won the auction for Chelsea Barracks ata price which is rumouredto be close to £1bn.

He is also reputed to be one of the largest players on the small Doha Securities Market, and is said to own the swankiest new hotel in Doha, the Four Seasons.

As chairman of fast-growing Qatar Airways, Sheikh Hamad is described bysome that know him asa good boss who rewardshis employees well.

The scale of Qatar's international investment agency pales in comparison with Abu Dhabi Investment Authority, with estimated assets of about $500bn plus, or Kuwait Investment Authority's $250bn.

But Qatar's booming gas-driven economy is the QIA's ultimate calling card. The tiny peninsula has built up government surpluses of about $20bn over the past four years, according to HSBC estimates, while current account surpluses of about $40bn over the same period provide a pool of savings for vehicles such as the QIA to tap to fund international acquisitions.

Per capita gross domestic product has trebled over the past six years to $60,000, three times the average across the Gulf Arab states of $19,000 a head in 2006. As the economy grows, Qatar is likely to buy into other economies as a means to support the government's aim of reducing dependence on hydrocarbons from about 70 per cent to about 50 per cent.

Background

The Qatari investors who bought 14 per cent ofJ Sainsbury this week might simply regard the supermarket chain as an undervalued stock.

However, there was speculation yesterday that their Three Delta and Delta Two funds might support Robert Tchenguiz, holder of a 5 per cent stake in Sainsbury. Coincidentally, Mr Tchenguiz used to employ Paul Taylor, who runs Three Delta. He has been urging the Sainsbury board to sell some of its £7.5bn of freehold property, perhaps by spinning off a real estate investment trust.

Or the investors could be planning a buy-out of the supermarket group with Qatari state backing. Old colleagues of Mr Taylor's say he once wanted to attempt

a Sainsbury's buy-out.

"It would not surprise me if this is the start of something bigger," said one acquaintance yesterday.