- The Washington Times - Wednesday, July 23, 2008

HARTFORD, Conn. | General Electric Co. has agreed to a joint venture with an Abu Dhabi government investment company that will pump $4 billion of outside capital into its weakened commercial finance business, part of a new global partnership to expand on GE’s fast-growing sales in the Middle East.

The deal with Mubadala Development Co. also will launch or broaden several other ventures with the Persian Gulf investment vehicle, which expects to become one of the top 10 institutional investors in GE, whose businesses include light bulbs, jet engines and NBC television.

In a joint statement Tuesday, Fairfield-based GE and Mubadala said they are aiming to capitalize on strong growth opportunities in the Middle East and around the globe. The agreement provides for shared capital commitments to new joint ventures and investment funds.

“I think there’s no shortage for opportunities that the joint venture can focus on,” Jeffrey R. Immelt, GE’s chief executive, told news reporters in a conference call.

Mubadala, based in Abu Dhabi, the capital of the United Arab Emirates, could eventually own about 120 million GE shares, which would be valued at close to $3.4 billion at current market prices, analyst Nicholas Heymann of Sterne Agee said in an investor note.

By entering into investments with a well-capitalized Middle East partner, “GE has effectively found new demand for its shares during a particularly challenging earnings period for financial services companies,” Mr. Heymann said.

GE shares have tumbled by nearly 23 percent since April 11, when it announced first-quarter earnings guidance that widely missed Wall Street expectations. By comparison, the Dow Jones Index has dropped by about 9 percent.

GE said at the time that it was unable to complete asset sales due to tighter credit markets. And Mr. Immelt said the near-collapse of the Wall Street investment firm Bear Stearns Cos. also hurt the performance of GE’s commercial financing business.

Mr. Heymann said the deal helps GE spread its risk in financial services.

“You move more outside the U.S. into emerging markets, where there’s presumably more growth,” he said in an interview.

GE and Mubadala plan to allocate $4 billion each in equity for the jointly owned commercial finance venture over a three-year period. The $8 billion venture will be established in the next 12 months and will be headquartered in Abu Dhabi. It aims to expand GE’s opportunities around the globe, especially in the Middle East and Africa, and will have targeted assets of more than $40 billion.

GE also plans to commit up to $50 million for global investments in clean technology and companies that reduce dependency on traditional energy sources.

In addition, Mubadala intends to invest up to $200 million to GE Industrial Investment Partners, a new partnership of global investors that will provide capital to companies in the health care, energy and transportation industries.

Mubadala investments also include an 8.1 percent stake in computer-chip maker Advanced Micro Devices, Inc. and a 7.5 percent stake in private equity company Carlyle Group.

The latest deal promises to spur more business in the Middle East for GE, which last year generated revenue of more than $5 billion, a 50 percent increase over 2006.

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