© Reuters. FILE PHOTO – Prince Alwaleed bin Talal, a billionaire from Saudi Arabia, attends an investment conference held in Riyadh (Saudi Arabia), October 23, 2018. REUTERS/Faisal Al Nasser
Saeed Azhar, Hadeel A Sayegh
DUBAI, (Reuters) – The international ambassador for Saudi Arabia may soon be unable to take the reins.
Saudi Arabia’s Warren Buffett-like Prince Alwaleed bin Talal has been investing for years in businesses from Saudi Arabia. Citigroup (NYSE: ) to Uber(NYSE:), to Twitter, (NYSE:), with near complete autonomy
Sources familiar with the matter stated that the Kingdom Holding investment company now counts Saudi Arabia’s Public Investment Fund, (PIF), as a minor shareholder. The powerful sovereign wealth fund will likely not be sitting on the sidelines.
Two sources who are familiar with Kingdom Holding’s business said that the kingdom’s wealth fund will demand more control over investment decisions than it has in the past. This is part of Crown Prince Mohammed bin Salman’s ambition to diversify Saudi Arabia’s economy.
A Gulf sovereign wealth fund investor said that the PIF would want to become an active investor. Alwaleed’s investment committee is at the heart of Kingdom Holding. I cannot imagine that the PIF would be subject to the dictates of the prince.”
When Reuters reached out to them regarding the future implications of PIF’s minority stake, Kingdom Holding and Prince Alwaleed declined to comment.
Alwaleed (67) had a long-standing grip on Kingdom shares. He owned all of the Saudi stocks except 5%, until PIF bought a 16.87% share for $1.5billion last month.
It was more than four decades since Prince Alwaleed was captured in anti-corruption efforts ordered by the Crown Prince. The Prince held Prince Alwaleed for three months at Riyadh’s Ritz Carlton, along with many other royals and senior officials.
Many detainees were freed after financial settlements. Prince Alwaleed stated in March 2018 that the deal he made with the government was confidential.
The PIF purchase did not appear to be related to the settlement. The grandson and first prime minister of Lebanon, Riad Al Solh, Saudi Arabia’s King Abdulaziz was speaking on behalf of Prince Alwaleed.
PIF deals were made at Kingdom Holding’s lowest stock price of the year. There was no premium. Two sources close to the situation said that the deal was not negotiated with bankers familiar with Alwaleed or the PIF.
“CHANGE OF TAKING”
As part of settlements to secure their release, the Saudi state acquired direct control stakes in some Saudi entrepreneurs held in detention in 2017.
Analysts believe that Kingdom Holding’s intervention was a change in strategy for the Saudi government. The Ministry of Finance (MoF), which holds the remaining stakes, is holding them instead of the wealth fund.
Capital Economics economist James Swanston stated that “it is an indication that there has been a change in tack.” The stake is now owned by PIF, so it could be seen as more of an opportunity for investment.
Jim Krane from Rice University’s Baker Institute said that the PIF is responsible for generating enough income via investments to create new Saudi economic sectors. While the Ministry of Finance is more concerned with strategic planning and risk management, the Ministry of Finance has more of a role.
Alwaleed has a unique investment approach that focuses on opportunities which could prove very profitable but also carry high risk. He is open to looking at assets undervalued, according to one source with information about Kingdom’s business.
The PIF is effectively buying an investment in Prince Alwaleed’s track record of success. Saudis will be able to benefit as long Alwaleed can pick winners,” Jim Krane (author of Energy Kingdoms: Oil and Political Survival within the Persian Gulf) said.
After a hugely successful bet with Citigroup in 1990s, Alwaleed became an international celebrity and was an early investor at Apple (NASDAQ:).
Prince Charles and Kingdom also invested $300 million together in Twitter in 2011, and increased their stake in 2015. He agreed last month to transfer a $1.89 trillion stake into Elon Musk’s deal instead of cashing out.
PIF’s decision may limit Prince Alwaleed’s freedom of movement, but Kingdom Holding will be able to take advantage of the sovereign wealth fund’s financial and political clout in dealmaking, according to two sources close Kingdom.
The sovereign wealth fund, which became a more active investor in 2015 has made bold moves to increase its visibility in business and sport.
After Uber was listed, the company took an $3.5B stake and then invested $45B into Softbank (OTC)’s initial technology fund. Last year, they bought 80% of Newcastle United, a British soccer club, which has been disrupted by its LIV league.
Although the PIF has more assets than $600billion, its investments record is mixed.
While it was able to make a large profit by investing in Lucid, an electric vehicle manufacturer before it went public, Softbank has seen its investments become more volatile because of rising rates and instability. This is affecting high-growth tech stocks.
The Crown Prince is using the wealth fund to finance his Vision 2030 economic diversification strategy.
Knight Frank, a property consultancy, has estimated that the projects to grow Saudi Arabia’s nascent industry of tourism and other industries, such as building a huge futuristic green metro called NEOM (which is worth $500 billion), are valued at over $1 trillion.
Riyadh, however, has not been able to attract as many foreign investors. The PIF might benefit from Alwaleed’s connections with important players in the hotel sector thanks to its stakes in Four Seasons along with the Fairmont Raffles or Swissotel chains.
Alwaleed is a proud heir to the Alwaleed family despite being a well-known celebrity. He spends time in the Saudi desert with friends and family, meeting tribesmen as well as their families.
Three sources say Khaled bin alwaleed’s son, Khaled bin Alwaleed, is on his own, taking risks in real estate and technology. He also invests in food manufacturing, vegan chains, and other investments through KBW Ventures.
A source in finance claimed that PIF may propose a candidate who would be trained by the prince to succeed him.
According to the source, “Take the prince out of it and it’s just an Saudi investment holding company.” He is the reason I believe that many of these deals wouldn’t have happened without him.
($1 = 3.7518 riyals)