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Mubadala acquires 35 per cent in Italian business jet maker

posted on 22/04/2006: 2320 views

The Abu Dhabi-based Mubadala Development, a principal investment company owned by the Government of Abu Dhabi, has acquired a 35 per cent of the equity of the Italian business aircraft maker, Piaggio Aero, in order to fund new jet development.

Though Mubadala Development did not reveal the value of the acquisition, the level of investment was previously thought to be around US$20 million (about Dh73.4 million). However, according to industry experts, the average investment in a business jet is anywhere between US$10 million and US$20 million (Dh36.7m and Dh73.4m).

The deal will see Mubadala Development receive three of the seven seats on the Piaggio board and will appoint the vice-chairman. Mubadala will also receive one of the three seats on the company's executive management committee. "For us, this investment makes commercial sense on two levels. As a straight investment opportunity Piaggio Aero has a remarkable performance track record. Importantly, the transaction also offers the opportunity to explore potential synergies that both Piaggio and Mubadala can leverage,” said Khaldoon Al Mubarak, Chief Executive Officer of Mubadala Development.

"This deal places us in a position to further grow our position in [Europe and North America] while beginning to explore new markets, including the Middle East, Far East and South America – each of which offers high potential for sales,” added Piero Ferrari, Chairman of Piaggio.

Mubadala Development's investment, however, involves the purchase of existing shares and new shares. Piaggio Aero's primary shareholders are the Ferrari and di Mase families. As a result of the transaction, they will now hold 55 per cent of the share capital of the company. And together with Mubadala's 35 per cent stake, this accounts for 90 per cent of the share capital of the company. The other 10 per cent is held by a mixture of banks and other shareholders.

The transaction is founded on the belief that the business aviation segment will continue to expand significantly. And this belief is not baseless if one goes by the growth projections. The business aviation market in the Middle East is growing at the rate of 50 aircraft a year and will accelerate even further in the times to come.

Boeing, on the other hand, claims that a quarter of the global sales of BBJs (Boeing Business Jets) comes from the Middle East. "While the government accounts for 44 per cent of that, 37 per cent comes from private individuals,” Steven Hill, President of Boeing Business Jets, Boeing Commercial Airplanes, USA, had said in earlier reports. According to the Dubai Department of Civil Aviation, there are 250 private jets operating in the GCC at present, with the forecast of it touching the 300-mark by the end of this year. (Emirates Today)


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