Good news for Carlyle - but less good news for some great expectations around the role of sovereign wealth funds as long-term asset owners.
According to a Reuters report, Carlyle Group is the likely frontrunner to acquire a 30% stake in Spain’s Compañía Española de Petróleos (Cepsa) from Abu Dhabi sovereign wealth fund Mubadala Investment Company, for as much as US$3.4 billion.
Mubadala withdrew plans to list 25% of Cepsa last October in the face of volatility and uncertain investor sentiment, opening up the option of a sale to private equity buyers instead. Other potential buyers cited in the report include Apollo Management, CVC Capital Partners and Macquarie.
Abu Dhabi has had a share in Cepsa since 1988, when the emirate’s International Petroleum Investment Company (IPIC) bought a 10% stake in the Spanish energy multinational. IPIC subsequently expanded its shareholding, and ultimately acquired 100% of the company after France’s Total exited in 2011, paying 3.7 billion euros ($4.16 billion) for the petrochemical giant’s stake of just under 50%.
If the Reuters report on the valuation of the putative deal is correct, Mubadala will be looking at an almost 100% profit on the investment since 2011. Such a deal could also soak up a useful portion of Carlyle’s main ex-US energy investment fund, the $2.5 billion Carlyle International Energy Partners launched in 2013.
Mubadala was established in January 2017 by a merger of IPIC with the former Mubadala Development Company. The Sovereign Wealth Fund Institute currently lists Mubadala at number 14 in its rankings of sovereign investors by asset value, with $226 billion of assets under management. Other Mubadala holdings include Austrian oil and gas company OMV and energy utility Energias de Portugal.
Hopes have been raised in the past, especially in connection with large-scale infrastructure transactions such as the sale of Australian ports, that sovereign wealth funds might truly come into their own as very long-term asset owners, with returns horizons stretching over several decades and a very value-building approach.
The Cepsa deal demonstrates that they can be as short-termist and quick to exit as any buyout firm. Just as well that Carlyle and its ilk have such well-stocked magazines of dry powder right now to help the asset sellers hit their returns targets.