By the time the 2022 World Cup comes around, even the most casual of football fans is likely to have long associated Qatar with the beautiful game. In February this year, Spanish football club Barcelona agreed to drop UNICEF from the front of its team shirt and replace it with a new sponsor, the government-run Qatar Foundation. In return, the small Gulf nation is paying $40m per season to adorn the jerseys of one of the most famous football clubs on the planet.
Meanwhile in football’s most lucrative market, the English Premier League, Qatar is also rumoured to be circling the world’s third-richest club, Manchester United. In February a source close to the ruling Al Thani family reportedly confirmed that Qatar had tried – and failed – with a bid of around $2.5bn; United’s American owners are believed to be holding out for closer to $3bn. If a bid is eventually successful, Qatar would be intimately associated with two of the biggest brands in the world’s most popular sport.
Such a coup would come as little surprise to those who have tracked the ambitious spending strategies of Qatar Holding, the main investment arm of Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA). Qatar is sitting on an estimated 26 trillion cubic metres of gas, the world’s third-largest reserve, and over the last five years QIA has worked to reinvest revenues from its energy exports.
“When you have so much in foreign exchange reserves you need to make a return on it and invest it,” says Mark McFarland, emerging markets economist at Emirates NBD.
“A large portion of the revenue streams from oil and gas sales is being invested overseas, some of which is into private equity, some of which is into real estate and other forms of asset investment, and some of which is into food security.”
As Qatar’s ability to ability to export liquefied natural gas around the world has developed, so has its international asset portfolio: last year, a report from New York-based financial analysis firm RGE Monitor concluded that Qatar had around $75bn worth of investments outside the country. And unlike Dubai, which embarked on a similar spending spree in the latter half of the last decade before finding its wings clipped by the credit crunch, Qatar can afford to think long-term with regards its return on investments.
“A lot of what Dubai did was funded by liability, whereas Qatar’s spending has been financed by bond issues and by revenue accumulation from the gas fields,” says McFarland. “The likelihood on there being a call on the SWF of Qatar is much less than there was on the SWF of Dubai, and so the investment itself is much better founded.”
Qatar Holding last year agreed to pay up to $2.7bn for a five% stake in the Brazilian arm of Spain’s Banco Santander SA. It also holds significant stakes in British bank Barclays PLC and Switzerland’s Credit Suisse Group, while other major investments include stakes in automaker Volkswagen AG, British retailer J Sainsbury PLC and the London Stock Exchange.
Still in the UK, Qatar boasts an extensive property portfolio including the London Bridge Tower (known as The Shard), Chelsea Barracks, the US embassy building in Grosvenor Square, and Park House on Oxford Street. It has a 24% stake in Songbird Estates, owner of the Canary Wharf financial district, and made headlines in May 2010 when it snapped up famed London department store Harrods in a deal reported to be worth $2.3bn.
In March of this year Qatar Holding opted to increase its stake in German construction services provider Hochtief to more than 12%. And in Spain, meanwhile, Qatar’s shopping trip didn’t stop at Barcelona. On 14 March Qatar Holding agreed to buy more than 6% of Spanish power utility Iberdrola SA for $2.82bn. As part of the deal, Qatar Holding and Iberdrola said they will work together to develop new electricity-related business projects, mainly in fast growing and emerging markets. Once the deal is complete, Qatar will own a total of 6.16% of Iberdrola, Spain’s largest utility by market value and the world’s biggest wind-power generator.
“In addition to a strong, stable European franchise, our investment in Iberdrola provides significant exposure to other important global markets including Brazil, Mexico and the United States of America,” Qatar Holding managing director and CEO Ahmad Mohamed al-Sayed said in a statement.
Indeed, Qatar’s focus on the Americas has been intensifying over the last 12 months. South America, in particular, is seen as a potentially rewarding market that is looking for significant Foreign Direct Investment (FDI) – just the ticket for a cash-rich country such as Qatar.
According to government figures, bilateral trade between Qatar and Brazil amounted to $366m in the first ten months of 2010, growth of almost 100% over the same period in 2009. And in December meetings took place between public and private sector representatives from Doha, Brazilian minister of Development, Industry and Foreign Trade Miguel Jorge, and Arab Brazilian Chamber of Commerce president Salim Taufic Schahin.
Ali Bin Abdul Latif Al Misnad, the director of the Qatar Chamber of Commerce, said he would like Brazilian companies to participate in projects in the Arab country, while his counterparts from South America discussed the potential for Qatari companies to participate in exploration and production of oil in the pre-salt layer on the Brazilian coast. “We must diversify the trade basket [exports and imports],” said Jorge. “We are open to products from Qatar and are available to boosting our purchases… And to Brazil, Qatar may be a good option for company internationalisation.”
One such company that is actively exploring investment opportunities with Qatar is Itau Securities, the Middle East arm of Itau Unibanco, Brazil’s biggest bank and the largest financial conglomerate in the Southern Hemisphere. “We are talking to the Qataris and each side is getting to know the other well,” says Adriano Cantreva, head of Itau Securities. “There are opportunities in both markets and the more we have a dialogue, the more that we get to know what Qatar is looking for, and the more we can discuss with them.”
Qatari delegations to Brazil will no doubt cast their eye over preparations for the 2014 World Cup, which will be hosted by the South American serial-World-Cup-winners. The Gulf nation’s recent infatuation with football shows no sign of abating and will only build as 2022 nears, although if Manchester United does become the latest in Qatar’s string of high-profile global acquisitions, some might wonder how such a prestige purchase would fit in alongside QIA’s less glamorous, but perhaps more hard-nosed business ventures.
Buying a football club is widely considered to be a glamour purchase, as opposed to an opportunity for serious return on investment. While players make money in football, not a lot of clubs do – Roman Abramovich at Chelsea and Sheikh Mansour at Manchester City will attest to that. Qataris won’t be too perturbed, though: if QIA does buy Manchester United, this is one rich owner that’s unlikely to ever run out of cash. In fact, you’d bet your shirt on it.
Tuesday, May 24- 2011 @ 12:52 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.