DUBAI/BERLIN – Aabar Investments PJSC, the Abu Dhabi sovereign-wealth fund that's Daimler AG's largest shareholder, may reduce its stake in the maker of Mercedes-Benz cars by issuing a bond exchangeable into the manufacturer's shares.
Aabar raised 1.25 billion euros ($1.77 billion) in the transaction, 500 million euros more than initially sought, the Abu Dhabi government investment unit said Wednesday in a statement.
The Abu Dhabi investor can choose to settle the bonds in cash and holds derivative contracts to participate in further gains in Daimler stock.
The five-year notes will pay a coupon of 4 percent and can be handed over for stock in Daimler when the shares rise 30 percent, Aabar said. The proceeds will be used for "general corporate purposes," it said. The deal is being managed by Bank of America Merrill Lynch, Deutsche Bank AG and Morgan Stanley, according to the statement.
The issue could reduce Aabar's holding to 7.2 percent from 9.1 percent when the bond matures in 2016. "It sends the signal that there's limited upside" for the company, when a large shareholder starts to monetize its holding, said Daniel Schwarz, a Frankfurt-based analyst at Commerzbank AG. "I doubt that Aabar wants to completely exit Daimler, but it can't be ruled out," he said.
Aabar invested 1.95 billion euros in Daimler in March 2009, providing an injection of fresh capital in the midst of the global recession. The automaker has since recovered and is targeting record deliveries of Mercedes cars this year, fueled by demand from China and the U.S. for the updated C-class sedan and revamped SLK roadster.
The bond doesn't change Daimler's relationship with Aabar, which had informed the automaker prior to announcing the security-sale plan, Florian Martens, a Daimler spokesman, said Wednesday by phone.
Aabar, which had previously considered raising its stake in Daimler to 15 percent, said it may exchange as many as 20 million shares, or 1.9 percent of the automaker's capital, when the bond matures. "Aabar's commitment to its investment in Daimler remains unchanged," the fund said in the statement.
Projects with Daimler, including a joint 7.9 percent investment in electric-car manufacturer Tesla Motors Inc. and a 40 percent stake in Mercedes's Formula One racing team, "reflect Aabar's strong belief in Daimler," the fund said.