By Mike Caggeso
Dubai's extended its state-funded global reach a bit further yesterday (Wednesday) when its Dubai World investment arm agreed to pay $5.1 billion for a 9.5% stake in investor Kirk Kerkorian's MGM Mirage (NYSE:MGM).
Dubai World is a holding company for the Persian Gulf state. News of the deal sent MGM shares up $6.62 each, or 8.91%, to close at $80.94. [For an analysis on how investors may profit from this deal, or others like it, click here].
The MGM deal is the latest in a series of investments and acquisitions Dubai World has made in the past few months. And those deals continue to show global outreach, albeit one with significant potential domestic benefits for Dubai.
Over the past month alone, the deals that Dubai World and its related investment companies have been involved with include:
- Dubai Drydocks World, the global maritime arm of Dubai World, took control of Asian shipyard operator Pan United Maritime. The $428.88 million deal netted Dubai about 85% of PUM's shares.
- Istithmar, an investment subsidiary of Dubai World, purchased Barneys, an upscale U.S. retail chain, for $940 million. The deal capped off a bidding war with Fast Retailing Company in Japan.
- Borse Dubai, another arm of Dubai World, made a bid of nearly $4 billion bid for a 28.4% stake in OMX AB ), owner of seven stock markets in the Nordic and Baltic regions. The bid was a surprise to the Nasdaq Stock Market, which had made the first bid. In Borse Dubai's corner is its current CEO Per Larsson, who happens to be the former OMX CEO.
In July, state-run Dubai Aerospace Enterprises sought to buy a 60% stake in Auckland International Airport Ltd., a $1.8 billion proposal that is still being chewed on by local and state government in New Zealand.
In May, Istithmar bought the Jack Nicklaus designed Pearl Valley golf estate and spa, a massive development in South Africa's luxurious Cape Winelands. It was Istithmar's second purchase there in a year; its first was the V&A Waterfront, a $1 billion investment.
And last year, Dubai World made a successful $6.8 billion bid for the United Kingdom's third-largest container port operator. The purchase incensed U.S. lawmakers, who criticized the takeover as a threat to national security. DP World in turn sold six U.S. port terminals to American International Group Inc. (NYSE: AIG).
All investments are tied to the same reason: Dubai is experiencing explosive growth from its real estate and tourism industries, but especially from its Jebel Ali Free Zone, its tax-advantaged business district. And because the state can't expand very much within its own borders (the emirate is a shade larger than Rhode Island), it is using its extra money to invest and expand internationally.
Some investments are meant to(i.e. air traffic via Auckland International). Some are just good investments meant to reward Dubai with consistent cash flows.