Investor Alert

July 6, 2007, 12:01 a.m. EDT

Dubai Capital Buys EADS Stake In Latest Overseas Investment

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By Steve McGrath

One of Airbus's biggest customers is now a part owner. Dubai International Capital became one of the biggest shareholders of Airbus parent European Aeronautic Defence & Space Co., buying a 3.12% stake and backing EADS's restructuring plan for its jet-making arm. The investment marks a further development in the rising interest of Middle Eastern investors, flush with cash from four years of high oil prices, in global companies.

DIC, an investment firm backed by the Dubai government, didn't say how much it paid for the stake through its Global Strategic Equities Fund, which has raised $2 billion to make long-term investments in global companies. At current market prices, a 3.12% stake in EADS is valued at about €608 million ($827 million). Dubai, United Arab Emirates, is one of the biggest buyers of Airbus planes. Government-owned Emirates Airline has 50 Airbus planes, with an additional 116 on order. It is the biggest customer for Airbus's giant A380 aircraft, with 47 on order.

DIC said it won't seek a board seat or take an active role at the maker of Airbus commercial and military aircraft, but "will seek to build a strategic relationship with the EADS management and shareholders." EADS said it welcomed the investment and sees DIC as a "usual institutional investor." The purchase is in line with the company's strategy of attracting a broad shareholder structure, EADS spokesman Edmund Reitter said.

"It's a trend that we've been seeing for some time. Countries in the Gulf seek to diversify their excess revenues from oil," said Ashish Dave , head of private equity for the Middle East and South Asia at KPMG. "We're going to see more government and quasi-government bodies and funds going global and acquiring stakes in international assets."

EADS, which is controlled by French and German shareholders, has struggled in the past year after announcing delays to its Airbus A380 and A350 planes. The delays prompted a massive restructuring of Airbus and huge write-offs at the parent company.

DIC's stake is lower than the 5% held by Russia's OAO Bank VTB. VTB bought its stake in EADS in September for about €920 million, after the manufacturing and sales woes at Airbus caused EADS shares to plunge to a low of €19 from about €33. EADS shares rose five European cents to €24.10 in Paris. Traders said the news was largely priced into the stock.

Kirsten Bienk and Mirna Sleiman contributed to this article.

Write to Steve McGrath at steve.mcgrath@dowjones.com

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