The Abu Dhabi Investment Council is set to join Mubadala Investment Company in a move that will boost Mubadala's assets under management to over $200 billion amid consolidation of wealth funds in the emirate.
"An investment vehicle of such scale will enhance the country's competitive position," Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, said on Twitter.
ADIC's investments include First Abu Dhabi Bank; the largest bank in the UAE in which ADIC has a 33.4 per cent stake, and Abu Dhabi Commercial Bank, in which it has a 62.5 per cent and Union National Bank in which it has a 50 per cent stake. ADIC also founded Al Hilal Bank, a Sharia-compliant lender.
Additionally, ADIC has stakes in Abu Dhabi National Insurance Company, Abu Dhabi Aviation Company, and Invest AD, an Abu Dhabi-based asset manager.
ADIC has assets valued at $123 billion according to the Sovereign Wealth Fund Institute while Mubadala has assets that are valued at $127 billion.
Shares on the Abu Dhabi Stock Exchange rallied on the announcement on Wednesday, rising 0.9 per cent.
"[The tie up] is positive, as it reduces costs and should allow a re-assessment of strategy for the short, medium and long term," said Sanyalaksna Manibhandu, head of research at FAB Securities.
"At the sovereign wealth industry level, there is also potential for economies from the removal of a level of duplication. Another positive, in the context, is in the announcement representing a trend that began in July 2016, when the Abu Dhabi banking sector merger was confirmed."
Mubadala merged with International Petroleum Investment Company in 2016, a move that is estimated to have saved 20 per cent in costs.
Less than 20 per cent of Mubadala's assets were energy-related, whereas most of Ipic's investments were in that sector. And while Mubadala's focus was on the Abu Dhabi economy, Ipic mainly invested abroad.
Post-merger Mubadala Investment company has stakes in Emirates Global Aluminium, the green-energy firm Masdar, the property developer Aldar and a host of other companies. It also has stakes in GE and the private equity firm Carlyle Group, the Spanish refiner Compañia Española de Petróleos (Cepsa) and the Abu Dhabi diversified investment firm Aabar.
Other investments include Austria's OMV, the Austrian petrochemical firm Borealis and the Canadian petrochemical maker Nova Chemicals. Aabar has stakes in commodity trader Glencore and Italian bank UniCredit.
The merger of Mubadala and Ipic followed a similar tie-up between National Bank of Abu Dhabi and FGB.