Aabar, German firms sign Algerian car plant deal

UAE investment firm Aabar is setting up vehicle and engine manufacturing plants in Algeria with five German firms, including affiliate Daimler.

Aabar bought a 9.1 percent stake in Daimler in March and said it would pursue joint projects.

In its latest foray into the auto industry, Aabar said on Monday the Algerian venture would be led by German truck manufacturer MAN Ferrostaal and produce up to 10,000 cars and trucks a year.

Daimler, Deutz, MTU and Rheinmetall will participate as technology partners providing licences and intellectual property.

Algeria, the world's eighth-largest oil exporter and fourth-largest gas exporter, has struggled to attract foreign investors due to a lingering Islamist insurgency, red tape, tight currency controls and laws capping foreign ownership in businesses.

"Assembly is expected to start in 2010 following the modernisation or development of plants in Tiaret, Ain Smara and Oued Hamimine," Aabar, based in the UAE emirate of Abu Dhabi, said without giving the value of the deal.

Abu Dhabi newspaper Alrroya Aleqtissadiy said on August 6 the agreement would include setting up three joint stock firms including one to produce Mercedes military vehicles.

The deal would be worth about $720m, the paper reported, citing Aabar Chairman Khadem Al Qubaisi.

Qubaisi declined to comment when contacted by Reuters on Monday.

Aabar is an investment company controlled by the International Petroleum Investment Company (IPIC), which is wholly owned by the government of Abu Dhabi.

IPIC is one of the investment vehicles used by the Abu Dhabi government to invest oil income. Abu Dhabi pumps most of the oil produced by the UAE, the world's third-largest oil exporter.

Fuelled by a six-year oil boom, Abu Dhabi has invested billions of dollars in developing its infrastructure and propelling itself on the global stage.

Aabar has been on the expansion trail since IPIC took control of the firm in 2008. In July, Aabar said it planned to buy a 32 percent stake in Virgin Group's space travel unit Virgin Galactic, in Abu Dhabi's latest effort to lure tourists and diversify away from oil.

Dubai broker Al Mal kept its "outperform" rating on Aabar saying it could generate 28 percent returns in the near term.

"Going forward, we believe that IPIC will continue to treat Aabar as its spearhead investment vehicle into diversified non-energy assets and should continue to provide the company with access to cheap (or even free) funds in order to fuel further investments," Al Mal said in a note to clients on Aug 5.

Aabar shares were down 1.8 percent at AED2.67 ($0.727) at 0754 GMT, underperforming a 0.5 percent fall in the Abu Dhabi market. (Reuters)

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