Image courtesy of Mubadala

IPIC and Mubadala Merge

What the Mubadala and IPIC merger suggest about wider trends in the Gulf.

Sep 25, 2016

Two of Abu Dhabi’s largest sovereign wealth funds, the International Petroleum Investment Company and Mubadala Development Company, are now merging following an order from the Abu Dhabi government. IPIC is the Abu Dhabi government’s investment vehicle for overseas energy assets and Mubadala is a large investment fund mandated to diversify Abu Dhabi’s economy through its primarily domestic investments. Mubadala developed NYU Abu Dhabi’s Saadiyat Island campus.
IPIC and Mubadala separately hold assets valued at 65 billion USD each and the merged entity could hold assets worth up to 130 billion USD. In the last two years, however, both companies have suffered financial losses due to low oil prices: IPIC reported a loss of 2.5 billion USD in the 2015 fiscal year while Mubadala reported a loss of 326 million USD in the first half of 2016. Furthermore, IPIC has also been embroiled in the 1Malaysia Development Berhad, in which it claimed that the Malaysian government’s investment fund did not pay USD 6.5 billion worth of bond guarantee payments and interests to IPIC.
According to a statement by the Abu Dhabi government, Crown Prince of Abu Dhabi Sheikh Mohammed bin Zayed Al Nahyan issued an order to create a committee “assigned with the responsibility of merging the businesses of the two companies.” The statement expressed that the motive behind the merger was to “create greater benefits and enhanced economic value to the government of Abu Dhabi.” Indeed, many economic analysts view the IPIC-Mubadala merger as beneficial for the Abu Dhabi government’s finances. International credit rating agency Moody’s has said that the merger is beneficial for the companies as well as for the Abu Dhabi government.
Bankers said the government-mandated merger would result in a transformation of the IPIC’s corporate governance structure to the more modern and transparent model of Mubadala. Mubadala was established in 2002 and became the first sovereign wealth fund in Abu Dhabi to publish financial results in 2008.
The merger could also be seen as reflective of a wider trend toward cost rationalization and operating consolidation among corporations in the Gulf in a sustained low oil price environment. The National Bank of Abu Dhabi and First Gulf Bank, two of the largest UAE banks, are also merging to potentially create the largest bank in the Middle East and North Africa region with 175 billion USD worth of assets and a combined market capitalization of approximately 29.1 billion USD. Many analysts forecast more high-profile MENA mergers and acquisition activities in the pipeline.
Henry Jiang is Deputy Research Editor. Email him at
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