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Sony welcomes heavy investment from Dubai's sovereign funds

Foreign investment company Dubai International Capital said on Monday that it has made a “substantial” investment in Sony. While spokespeople for the company are not revealing the size of the investment, the Wall Street Journal believes that the stake is less than 5 percent, as any higher the firm would be required to make a public disclosure according to Japanese law – but no such disclosure has been made.

Dubai International Capital’s (DIC) investment, even at just under 5 percent, is considered substantial considering Sony’s largest shareholder Dodge & Cox is recorded to own 8.3 percent. The investment company said that it chose Sony because of its “ongoing strategy of focusing on capital efficiency and cash generation,” and that it expects its shares to grow in the medium term, serving as a vote of confidence for the Japanese electronics maker.

Quickly following news of the Dubai buy, shares of Sony Corp. rose 4.54 percent or 250 yen, closing at 5,750 yen with 18.01 million shares changing hands on the Tokyo Stock Exchange. Conversely, Nintendo shares fell 1.28 percent or 800 yen to 61,700 yen.

DIC, owned by Dubai Emir Sheikh Mohammed bin Rashid al-Maktoum, was founded in 2004 with $13 billion. According to Dow Jones, DIC plans to raise a further $600 million following its buy into Sony. Due to the swell in energy prices, Middle Eastern funds have trickled into technology investments. Mubadala Development Company, a United Arab Emirates government-funded investment firm based in Abu Dhabi, has acquired an 8.1 percent stake in AMD for $622 million.

As the oil reserves that many Middle Eastern fortunes are built upon are depleted, those with supreme wealth are looking to diversify their assets to ensure their continuing riches. Companies such as Sony, however, appear to welcome the investment.

“We are happy that DIC has recognized the strength of the Sony brand as well as our unique competitive advantage in having both entertainment and electronics assets to drive our businesses forward,” said Sony Corp. CEO Sir Howard Stringer in a prepared statement.

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Spending those dollars?
By tjr508 on 11/27/2007 8:53:41 PM , Rating: 2
Looks like with the all mighty dollar taking a plunge, the UAE wants to turn them into something that may grow instead of shrink. I saw something on CNN today about them buying into Citi to the tune of around $7B, and I believe there was talk of them buying a large chunk of AMD as well.




RE: Spending those dollars?
By radializer on 11/27/2007 9:00:41 PM , Rating: 2
quote:
I believe there was talk of them buying a large chunk of AMD as well.


The Mubadala Development Company already acquired an 8.1% stake in AMD as was mentioned in the article above http://www.dailytech.com/Abu+Dhabi+Firm+Takes+81+S...

Did you mean to say that the acquisition of another fractional stake of AMD was in the works? I doubt that ... not from the same parent company at least.


RE: Spending those dollars?
By creathir on 11/27/2007 10:39:54 PM , Rating: 5
Considering most of their money is based on the dollar or is in dollar's, it would be advantageous for them to shore the dollar up, hence the vast expense in Citi.

The all mighty dollar will maintain its status. Once these corrections are complete, all will be peachy keen. I find it even more interesting that Americans continue to purchase new items when things are so "dire".

The truth of the matter is, things are no where as bad as people are making them out to be. In my experience, when someone is screaming "the sky is falling", they are usually selling hard hats.

- Creathir


RE: Spending those dollars?
By feelingshorter on 11/27/2007 11:14:07 PM , Rating: 2
quote:
The truth of the matter is, things are no where as bad as people are making them out to be. In my experience, when someone is screaming "the sky is falling", they are usually selling hard hats.


If you can prove they are selling hard hats then the people screaming "the sky is falling" have a motive. What does the feds and/or other economist gain by screaming lies? Money, fame? No. They just do their jobs and look at the numbers. If anything though, this investments just strengthens the dollar.


RE: Spending those dollars?
By Ringold on 11/28/2007 5:39:39 PM , Rating: 3
quote:
What does the feds and/or other economist gain by screaming lies?


The fact is, there are only a few indicators of any trouble at all.

The first is that Democratic candidates make it sound like it's the Great Depression, Bush-style. Keep in mind it's an election year -- er, wait, it's an non-stop election decade. My mistake. No bias in this indicator at all.

The second is consumer confidence. Consumers are not economists, and they face a tax structure so complex it's impossible for a human being to understand their financial incentives fully. Given that high school economics teaches you two or three simple definitions and spends a week on how to balance a checkbook, when gas goes over $3.00 / gal they get scared, comparing this number to what they paid 10 years ago or 40 years ago. Consumer confidence is a leading indicator, I'll admit, but only because Roosevelt had it right when he said all we have to fear is fear itself. When people widely expect a recession, regardless of if the fear is based in fact or emotion, they spend less. Guess what happens when they spend less? That's right. Overblown fears of recession can in fact encourage a recession. Again I wonder how much of this is influenced by left-wing media placing fear in to the minds of the prosperous middle class in front of a fierce election year, a year where they hope to make up for 8 years of exile from executive power.

The third indicator is the housing market. There really is a problem there, but two problems with pegging recession fears on it. A single-industry recession in a massive economy doesn't necessarily mean anything. It means a single industry got over blown, and the free market is correcting itself. Credit standards tightened virtually overnight, and thanks to securitization spreading the risk, we've amazingly gone probably more then half way through the process of shaking out the losses without any one large firm finding out it's sitting on a live nuclear bomb. Citibank is still making money, so the financials are fine. Irrational investors, both those who sought mortgages and those that sold them, are correctly being punished. There's been almost no spill-over in to other markets. All is well.

In other words, one is meaningless, one is more psychological skullduggery than science, and the third is sound and fury.

Yet on the other hand, everybody now expects last quarters economic growth figures to be revized up from already amazing stats to 5.0% annualized GDP growth -- which, in case you're not familiar with developed nations growth rates, is amazing. If there is in fact a recession, it would be completely unprecedented to occur after such a strong quarter of growth so far above the long term rate.

In fact, you don't hear economists collectively screaming, nor do you hear the Fed panicking. They're all calm. They took quick, decisive action to keep the credit markets from freezing up, and now they're just rolling along fine-tuning expectations. They're still going to cut rates further, but only because inflation is turning out to be an almost non-issue, allowing them the flexibility to help out the couple sectors that genuinely are troubled.

Not to mention job growth is still strong, unemployment is low, and this past spring was the strongest hireing season for college grads in memory.

The macroeconomy is doing great. This isn't bloody France. Move along, people.


RE: Spending those dollars?
By Mach Omega on 11/28/07, Rating: 0
RE: Spending those dollars?
By Ringold on 11/29/2007 1:13:37 AM , Rating: 2
You didn't say anything either other than a bag full of insults.

Of course the economy is fragile. It always is. How is that an objective measure? Any economy in the world, at any time in history, would get a little rattled when a too-large-to-fail bank says "Sorry everybody, but X billions of dollars just evaporated." Is there an index somewhere of "fragility"?

What you appear to me to be is a liberal who, lacking any significant evidence of why the economy may be in trouble, simply resorted to aforementioned insults and references to "faith"; must be trying to dislodge that bible Kansas shoved up your.. well, anyway.

People are employed; we are, in fact, near/at full employment. The stock market has rallied strong for two days; it feels like 1990 all over again. Foreigners pumped in some liquidity; we got stability returned to our banking system, they got an investment at a cut-rate price. Six months peak to trough in 1990 -- guess what it has been this year? Six months, peak to trough; nevermind the 50 basis point induced Bernanke put rally in the middle. There's nothing new under the sun, comrade. Exports are strong. Labor participation rates are even high, even among minorities -- not to start a riot, but they often are the first to drop off, and yet despite fraying around the edges, likely construction related, they remain strong.

Could also note, I suppose, credit markets. Again, though, thats already started looking up; note the BHP attempt at taking over RTP. That massive above market price offer doesn't exactly suggest we're in for a giant fall. LBO's have slowed compared to earlier in the year, but compared to the total freeze we're already recovering there as well. It's also anecdotal, but we (New York City, I should say) has surpassed London this year for the first time in a little while in IPO money raised.

I did just scour the BEA (not CNN, and not Hillary Clinton's campaign site) and, try as I might, I can find no sign of impending recession. +3.9% real GDP, pre-upward revision, annualized in Q3, +1.43% chained disposable income growth YTD, 14.8 billion improvement in the current account with the latest year over year stats, all due to rising exports, which makes sense in light of the 1.8% growth in industrial output in October and the strong continuing job creation numbers every month. The CPI actually fell in August, -.1%, productivity growth has strengthened to 4.9%. The import price index stings a little, largely from oil imports, and traveling to Europe aint cheap, but most diamons are not without flaws. That last bit was courtesy of the BLS.

I even just tried to pull some less common data to really try to read the tea leaves; found the velocity of money:
http://research.stlouisfed.org/publications/mt/pag...
Check that beauty out. On the one hand, that correlates with the bear market in the start of the decade. On the other hand, it's a strong anti-inflationary signal, as is this:
http://research.stlouisfed.org/fred2/fredgraph?s[1][id]=DGS10 (doesn't look like the link works, but that should take you to a chart of the 10 year bond)

And this looks valid as well (I just looked at the charts, didnt read the commentary): http://mjperry.blogspot.com/2007/11/some-historica...

I suppose you could argue we were running in to a deflationary disaster, but.. wow, that'd be interesting. Give it a try. :)

Even most bears, you will note, that CNBC drags on the air viewed the recent sell off as a good time to stock up if you have fortitude and patience.

Unless you care to, you know, debate fact, you can troll someone else. Don't quote me any BS from CNN, either, or your favorite left-wing Presidential campaign website; so far you sound like someone who just got upset when he heard something that challenges his world view and decided to lash out without really saying anything at all.

Do give it a try, though. It'll either be a fun lesson in what propaganda artists are spinning in advance of elections or an interesting contrarian view. Or garbage. I await with baited breath for what will surely be a delluge of data that, golly, I must've missed at FRED.


RE: Spending those dollars?
By nfin1ty on 11/29/2007 3:28:51 AM , Rating: 2
blessings to that.. well put!


RE: Spending those dollars?
By jhinoz on 11/27/2007 11:44:12 PM , Rating: 2
quote:
Considering most of their money is based on the dollar or is in dollar's, it would be advantageous for them to shore the dollar up, hence the vast expense in Citi.


Two issues with that:

1. Do you know which of the funds that Dubai Investment Capital LLC manages was the one that took the stake in Sony? Seen the financials? Any idea what currency / currencies the fund is denominated in?

2. Any fund manger worth half a fart should lose next to zero on FX fluctuations if they have any idea how to manage foreign exchange exposure. Forward exchange contracts are a good place to start.

Lastly, how exactly is buying Citi going to shore up the dollar? The motivation was more likely that it was of the asset class that they wanted to buy, it was undervalued at the time of purchase, and appeared to be a higher quality asset than it's competition in its market segment.

One more while i'm on a rant, markets respond to perception, not reality. People shout "the sky is falling" and the markets get belted, at least in the short term.


RE: Spending those dollars?
By ksherman on 11/28/2007 8:50:14 AM , Rating: 3
The reason buying A STAKE IN (not the whole company)Citi will raise the dollar is because it will bring back a little more confidence in the US Banks, something that has largely fallen of as of late. They basically covered all of Citibanks previous quarter's losses. Since our dollar is not based on gold any more (since the 40's) the price of our dollar is based on the value and stabilty of our banking and financial market. By giving Citibank a boost, it helps to maintain the market.

True, the market does have short term peaks and pits that are heavily based on hype and sensation, but its not entirely like they are unwarranted. Blown out of proportion, sure, but they are a lot of fears that this credit crisis is beginning to look a lot like the late 20's and early 30's when the credit sector crashed flat on its face. Its up to the economists and bankers and legislators to find a way of avoiding that crash this time around.


RE: Spending those dollars?
By barjebus on 11/28/2007 10:43:52 AM , Rating: 2
Sorry m8 but thats the Bretton Woods Agreement (signed in 1944) you're thinking about in the 40's. The gold standard went out in 1971 when the U.S. abandoned it.


RE: Spending those dollars?
By crystal clear on 11/28/2007 2:36:22 AM , Rating: 6
Citigroup to sell $7.5 billion stake to Abu Dhabi

NEW YORK/DUBAI (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research) is selling up to 4.9 percent of itself for $7.5 billion to the Gulf Arab emirate of Abu Dhabi, giving the largest U.S. bank fresh capital as it wrestles with the subprime mortgage crisis and the resignation of its chief executive.

The capital injection will shore up Citi's balance sheet, which has been hurt by some $6.8 billion of writedowns and losses in the third quarter, and the potential for another $11 billion in the fourth quarter.

Citi is paying a high price for the capital injection by selling mandatory convertible securities to Abu Dhabi which pay a fixed coupon of 11 percent. That is above the average yield on U.S. junk bonds, which is 9.4 percent according to Merrill Lynch data.

Analysts at Royal Bank of Scotland said in a note that Citigroup was paying a "high price," but that the convertible notes would help boost the bank's core capital.

The sale to the $650 billion Abu Dhabi Investment Authority, the world's largest sovereign wealth fund, may also signal the freefall in U.S financial stocks is close to ending, analysts said.



http://www.reuters.com/article/businessNews/idUSHE...


Some Info about the UAE
By boredg on 11/27/2007 10:58:36 PM , Rating: 5
Just thought I would post some information about the UAE since I have lived there in the past and continually visit there.
The UAE is made up of several emirates (city-states), the most prominent ones to note are Abu Dhabi and Dubai. Abu Dhabi, where a lot of the oil money comes from is the capital of the country and has only recently in the past few years begun expanding its assets beyond oil.
Dubai on the other hand, does not have as much oil (comparatively) as Abu Dhabi, and accrues a large portion of its revenue from tourism, and as of late foreign investment. Some may recall the bid by a Dubai company which tried to buy a UK-based company which ran many US ports, but this was vetoed by the president due to political pressure.
It can be very easy to imagine Dubai as a desert, but it is known as 'The pearl of the Gulf' for good reason, its infrastructure and tourist destinations rival if not beat those in the west. The world's tallest building calls Dubai its home (Burj Dubai) as well as one of the worlds few 7 star hotels (Burj al Arab). Not to mention the large artificial islands that have been built/are under construction in the country as well. (Palm Islands, The World islands)
Hope this info brings some light to those uninformed about the region.




RE: Some Info about the UAE
By 1078feba on 11/28/2007 7:55:28 AM , Rating: 2
Been there a handful of times myself, and I echo your sentiments. It is the cleanest place I have ever been, well, except for the toilets, where they use hand water sprayers vice toilet paper. Never actually sit on the toilet and eventually you get adjusted to it. Over all though, everything is new, including the buildings, it's shiny, it's clean and well maintained, and the people are warm, friendly and generous.

I picked up a couple of staggeringly beautiful silk persian rugs for prices that are roughly 5x less than what you would pay over here in the states. 1200-1400 knots per square inch, so finely crafted that when someone holds them up and you step back a few feet to look at them, they look like paintings.

Stayed a few nights in both of those hotels, and they are beyond description. There is simply nothing else to compare them to, espcially the al Arab.


RE: Some Info about the UAE
By 1078feba on 11/28/2007 8:00:09 AM , Rating: 2
Strike that, the Dubai isn't the same one I had in mind. Statement about the al Arab stiil stands.


RE: Some Info about the UAE
By crystal clear on 11/28/2007 9:14:25 AM , Rating: 2
You seem to forget those (Dubai) GOLF courses & duty free shopping centre.


About DIC
By MFK on 11/27/2007 10:05:42 PM , Rating: 2
Lol, the article did not seem to imply this, or maybe I just did not read it, but I just wanted to point out that DIC is also a United Arab Emirates based firm. Dubai is also an emirate in the U.A.E.




RE: About DIC
By robinthakur on 11/28/2007 6:55:46 AM , Rating: 1
So Sony just got DIC'ed did it? Not really a surprise looking at the financials recently...

An investment into Citigroup is all well and good but don't be under any allusion that Citigroup didn't (mostly) cause the current downturn almost single handedly with its massive proliferation into the Sub prime sector. That's why their head guy resigned. It is quite funny the way some americans have an "Us and Them" mentality about this situation, but they're only buying your assets back with the money that you paid them for the oil. I'm sure they could probably purchase Citigroup outright if they wanted to...


RE: About DIC
By tmouse on 11/28/2007 12:10:04 PM , Rating: 2