Audacity pays off for Aabar

Comment: Aabar is back in the limelight following investments in Daimler and Virgin Galactic.

I don't know if Aabar has a mission statement, but if it does it should read: "To be the coolest company in the Middle East."

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Last Updated: May 05, 2011

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After a string of headline-making investments in names such as Daimler and Virgin Galactic it appeared to go a bit quiet. Not any more, for it has been revealed as the biggest outside investor in Glencore, a company that itself could make a claim to be among the coolest companies in Europe.

Aabar's agreed investment of a total of US$1 billion (Dh3.67bn) in Glencore's initial public offering gives it a guaranteed stake without dilution in exchange for agreeing to hold the shares for at least six months. But the deal is certainly not without risk.

Commodities, from which Glencore makes most of its profits, are at record highs. The bursting of China's property bubble, for example, could lead to a drastic slowdown of economic activity in the Middle Kingdom and oil and metals could tumble in price.

Some observers are drawing comparisons with Blackstone, the private equity firm that listed at the top of the market in 2007, only for its share price to tumble. Others suggest Glencore's appetite for risk is inherently dangerous - and there is something to be said for caution, when even investment bankers notice.

But much of this concern looks overblown. Glencore's floatation looks more analogous to that of Google's, or even Goldman's.

At the time of listing, Google appeared to be fully valued. Within six months of trading Google soared and kept soaring, and is still trading at a heady multiple despite the economic downturn.

Goldman's shares went on a roller coaster ride, but are now trading at three times the flotation price.

Aabar's audacity looks set to pay off again.