By Mike Caggeso
Staff Writer
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:
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 physically inject more business in Dubai (i.e. air traffic via Auckland International). Some are just good investments meant to reward Dubai with consistent cash flows.