Abu Dhabi-Daimler deal raises questions rather than answers

Investors applaud deal. But some analysts claim it shows how tough the auto market now is.
Abu Dhabi-Daimler deal raises questions rather than answers
By Martin Morris
Mon 23 Mar 2009 11:04 PM

As Abu Dhabi’s Aabar Investments took a friendly 9.1 percent, $2.73 billion stake in German car maker Daimler, investors pushed the company’s stock up 8 percent in early trading, Monday. It later settled back to trade up 1.34 per cent, despite a 10 percent capital increase that dilutes other shareholders.

If investors seem happy with the deal some analysts have questioned what it means for the rest of the sector if a financially solid company such as Daimler has made a move so early in a sector downturn, which is threatening the existence of some of the world's major carmakers.

Analysts at Sal Oppenheim said in a note that it is clearly a negative signal for the likes of Fiat, Renault and PSA. Indeed, if one of the strongest players in the industry resorts to raising fresh equity, what should the weaker players do?

Meanwhile, Aabar Chairman, Khadem Al Qubaisi, left the door open to buying further shares in Daimler in the future.

In a news conference he said that any increase is subject to due diligence and 'other things', but for now Aabar is satisfied with its 9.1 percent stake.

He added that he was not looking to gain a seat on the supervisory board for the moment and said he was "very positive" about the outlook for the German auto industry as a whole, although he ruled out interest in further deals without Daimler's consent or interest.

According to Aabar, Abu Dhabi supplied some $1.36 billion for the purchase through state-owned fund International Petroleum Investment Company (IPIC), which controls Aabar.

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