FOCUS: The Saudi investment king who no longer governs alone

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* The Saudi wealth fund has bought nearly 17% of Prince Alwaleed’s company

* State fund likely for an active investor – sources

* PIF may benefit from Alwaleed’s investment style – Analysts

By Hadeel Al Sayegh and Saeed Azhar

DUBAI, June 15 (Reuters) – The prince who is the international face of the Saudi economy may no longer be able to call the shots.

Prince Alwaleed bin Talal, Saudi Arabia’s self-proclaimed Warren Buffett, has made hundreds of millions of dollars for years investing in companies from Citigroup to Uber to Twitter with almost complete autonomy.

Now his investment firm Kingdom Holding counts Saudi Arabia’s Public Investment Fund (PIF) as a minority shareholder, and the powerful sovereign wealth fund is unlikely to sit on the sidelines, sources familiar with the matter said.

The wealth fund, which is at the heart of Crown Prince Mohammed bin Salman’s ambitious plan to diversify the Saudi economy, will want Kingdom Holding’s investment committee to have more decision-making powers than in the past, two sources with knowledge of Kingdom’s businesses said to Reuters

“(PIF) is going to want to be an active investor,” said a Gulf sovereign wealth fund investor. “Kingdom Holding’s Investment Committee is essentially Alwaleed and I cannot imagine the PIF being at the mercy of the Prince.”

PIF, Kingdom Holding, Prince Alwaleed and his spokesman all declined to comment when contacted by Reuters about what PIF’s minority stake would mean for future investments.

Alwaleed, 67, has long held Kingdom stock and owned all but 5% of shares traded on the Saudi Stock Exchange until PIF bought a 16.87% stake for $1.5 billion last month.

The deal came more than four years after Prince Alwaleed was embroiled in a Crown Prince-ordered anti-corruption campaign that was held for almost three months at Riyadh’s Ritz-Carlton along with scores of royals, senior officials and businessmen.

Most of those detained were released after financial settlements were reached, and Prince Alwaleed said in March 2018 he had reached a confidential and secret agreement with the government.

It was not clear if the PIF purchase was related to the settlement. A spokesman for Prince Alwaleed, grandson of Saudi Arabia’s first king Abdulaziz and Lebanon’s first prime minister, Riad Al Solh, said it was purely a deal.

The PIF deal was completed at Kingdom Holding’s lowest share price this year without a premium. Bankers who normally work with PIF or Alwaleed were not hired for the deal, two sources familiar with the matter said.

‘CHANGEOVER’

The Saudi state took direct controlling stakes in the companies of some Saudi entrepreneurs jailed in 2017, including the Binladen construction group and the media company MBC, as part of the settlements aimed at securing their release.

However, analysts said the intervention in Kingdom Holding represents a change in strategy by the Saudi government, as the other shares are held by the Ministry of Finance (MoF) and not the wealth fund.

“This is an indication of a change in course,” said James Swanston, Middle East and North Africa economist at Capital Economics. “With PIF now holding the stake, it can now be viewed more as an investment opportunity.”

The PIF’s role is to generate enough income through investments to develop new sectors in the Saudi economy, while the Treasury is more the custodian of day-to-day spending and much less strategic or interested in risk, said Research Fellow Jim Krane at the Baker Institute of Rice University.

Alwaleed’s investment style has focused on new opportunities that could be very lucrative but carry risk, as well as undervalued assets, said one of the sources with knowledge of Kingdom’s business.

“The PIF is essentially acquiring an interest in Prince Alwaleed’s successful investment track record. As long as Alwaleed shows he can still pick winners, the Saudis will benefit,” said Jim Krane, author of Energy Kingdoms: Oil and Political Survival in the Persian Gulf. .”

Alwaleed rose to international prominence after making a large winning bet on Citigroup in the 1990s, and was an early investor in Apple.

The prince and kingdom jointly invested $300 million in Twitter in 2011 and increased his stake in 2015. Last month, he agreed to contribute a now $1.89 billion stake in Elon Musk’s acquisition deal rather than cash it out.

SUCCESSION

While PIF’s move could hamper Prince Alwaleed’s maneuvering room, Kingdom Holding will benefit from the sovereign wealth fund’s political and financial clout when it comes to deals, the two sources close to Kingdom said.

Since becoming a more active investor in 2015, the sovereign wealth fund has taken some bold steps to raise its profile in the business and sports worlds.

The company took a $3.5 billion stake in Uber before going public, invested $45 billion in Softbank’s first tech fund, bought 80% of British soccer club Newcastle United last year and has rocked the golf world with its new LIV league revolutionized.

The PIF now manages more than $600 billion in assets, although its investment record has been mixed.

The company made a huge profit from investing in electric vehicle maker Lucid before going public, but its Softbank investment has been more volatile as rising interest rates and geopolitical instability lashed high-growth tech stocks.

The wealth fund supports the Crown Prince’s mega-projects in his Vision 2030 economic diversification plan.

Real estate consultant Knight Frank estimates that projects to develop Saudi Arabia’s burgeoning tourism industry and other sectors, which include building a massive $500 billion futuristic green city called NEOM, are worth over $1 trillion.

But Riyadh is struggling with as many foreign investors as hoped, and the PIF could benefit from Alwaleed’s relationships with major hotel industry players, thanks to stakes in Four Seasons, as well as chains Fairmont, Raffles and Swissotel.

Despite its high profile image, Alwaleed has stayed true to its roots. He often drives deep into the Saudi desert where he spends time with guests and meets tribesmen and their families.

The fact that his son Khaled bin Alwaleed has gone his own way, investing in technology, real estate, food manufacturing and vegan chains through his KBW Ventures and KBW Investments, has raised the issue of succession, three sources said.

A financial source said PIF could propose a candidate to be groomed by the prince as his successor.

“They take the prince out of the equation and it’s just a Saudi investment holding company,” the person said. “I don’t think many of those deals would have been made without him.” ($1 = 3.7518 Rials) (Reported by Hadeel al Sayegh and Saeed Azhar; Edited by David Clarke)

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