Qatar teams up with the UAE

At the signing ceremony, Mohammed Abdullah Al Gergawi, the UAE's Minister of State for Cabinet Affairs and also the Executive Chairman of Dubai Holding, said the firm would look at opportunities in private property, various long-term ventures and would also seek to acquire stakes in 'major companies' listed on international stock markets. The UAE's WAM news agency also quoted Gergawi as stating the new entity would look most particularly at the Middle East and North Africa.

It is clear both countries hope the new investment vehicle will be able to secure some very solid acquisitions and eventually build what Gergawi referred to as a 'high-profile, diversified investment fund'. The partners will form a joint committee to study the viability of potential investments and whether they would meet economic objectives.

Avid acquirers

In many ways, the fact the UAE and Qatar have now come together to form a joint investment firm makes perfect sense as both nations have, independently, pulled off some headline-grabbing deals in recent times.

One of Dubai's most prominent investment vehicles, Dubai International Capital, bought a sizeable stake in HSBC Holdings just last month for its Global Strategic Equities Fund, which is set to invest a cool $10bn in various Fortune 500 companies. DIC has over the past couple of years struck various deals involving the likes of the Tussauds Group, Travelodge, DaimlerChrysler and the Doncasters Group.

Meanwhile, Qatar, via the Delta Two investment fund, grabbed attention in late April when, after much speculation, it bought 302 million shares in the UK retail chain J. Sainsbury for close to $3bn, giving it a 17.4 per cent stake in the firm - and becoming its single largest shareholder. It has now upped this stake further to 25 per cent, amid rumours of a complete buyout.

The Qatar Investment Authority and Dubai International Capital have actually locked horns recently as both have expressed a strong interest in buying into Airbus parent company EADS, with DIC going so far as to say, just a few weeks ago, that it is currently carrying out due diligence on a possible acquisition. The QIA is also thought to have missed out to another Dubai based investment arm, Istithmar, over the $825m purchase of the Barneys New York chain of department stores announced this week.

Qatar aims for the big time

Qatar's head-long move into the mergers and acquisitions sector has been a fairly recent phenomenon and its investment levels are dwarfed by those of some of its fellow Gulf states. Prior to its Sainsbury deal, data provider Dealogic estimated that Qatar had spent around $2.1bn on M&A activity since 2000, whereas Kuwait had parted with more than five times this amount and, staggeringly, the UAE had pumped more than 20 times this sum into its investments.

The contrast is really seen when, according to the Standard Chartered Bank, Qatar's $40bn worth of assets are set against the $500bn currently being managed by the Abu Dhabi Investment Authority.

But with its economy growing rapidly, Qatar is now looking to crank up its investments into the big league. As a case in point, the state-owned Qatari Diar Real Estate Investment Company has been busy finalising a selection of overseas investments.

From the UK to Egypt

In April, Qatari Diar secured a 13 acre site of prime real estate in London when its $1.8bn bid for Chelsea Barracks proved successful. Just a month later and Diar was in the contrasting location of Yemen to tie up a joint venture with the Yemeni Investment Authority regarding the construction of a mixed use project on four million square feet of land.

But at the end of last month, Qatari Diar reached an agreement with Egypt's Industrial Development Corporation which will see a major industrial zone developed on the North African country's Mediterranean coast at Borg El Arab. The UK's Financial Times claimed the project will lead to the creation of 133,000 jobs and will generate about $5bn from production within a decade.

Qatar's decision to join forces with the UAE will unquestionably help it in its bid to build up a diversified portfolio of investments. The two countries are perhaps the most innovative and ambitious in the Gulf region, if not the entire Middle East, and, by pooling their experience and know-how, their joint investment firm is sure to cement some impressive acquisitions.