Tuesday, July 28, 2009

Aabar Investments To Buy 32% Stake In Virgin Galactic

. Tuesday, July 28, 2009

By stockOzone team

Abu Dhabi's Aabar Investments PJSC (AABAR.AD) Tuesday said it will pay $280 million for a 32% stake in Virgin Group's commercial spaceline, Virgin Galactic, in a move aimed at advancing the oil-rich emirate's plan to become a hub for scientific research and innovation.

The stake sale is the first step in a strategic partnership between Aabar and Virgin to create the world's first commercial spaceline, the companies said in a joint statement.

The transaction, subject to regulatory clearances in the U.S. and elsewhere, values Virgin Galactic at about $900 million.

Virgin Galactic expects Aabar's capital injection to fully fund the company as it begins commercial operations.

"The initiative will leverage the solid financial backing of Aabar and the pioneering technology and strong global relationships of Virgin Galactic," said Richard Branson, Virgin Group's founder.

Aabar is 71.23% owned by the International Petroleum Investment Co., or IPIC, which is fully-owned by Abu Dhabi's government. Abu Dhabi is the Organization of Petroleum Exporting Countries' third-largest oil producer.

Aabar has also committed $100 million to fund a small satellite launch capability. The Abu Dhabi-based company will also "gain exclusive regional rights, subject to regulatory clearances, to host Virgin Galactic tourism and scientific research space flights," the companies' statement said.

The deal will see Aabar construct "spaceport" facilities in Abu Dhabi.

Virgin Galactic's flights to space will start operating from the Mojave spaceport in California, according to its website. A spokesperson for Aabar could not say when the flights will be offered in Abu Dhabi.

Tickets to space are priced at $200,000 each and 300 people have pre-booked with Virgin Galactic, handing over $40 million in deposits, a Virgin Galactic spokesman told Dow Jones.

Virgin Galactic also hopes to exploit scientific research opportunities that will open once the U.S. National Aeronautics and Space Administration, or NASA, ends its shuttle program in the fall, 2010.

A NASA official cautioned that venturing into space is extremely costly, dangerous and difficult.

"Everyone has the opinion 'we can do this' but I've seen so many fail," he told Dow Jones Newswires.

Running a shuttle costs at least $3 billion a year, he said.

Flush with cash from years of soaring oil prices, Aabar and other Abu Dhabi sovereign investors are targeting foreign assets at a time of cheap valuations and to extend their influence outside the Middle East, while eyeing high returns and the transfer of know-how and technology.

In March Aabar became the largest stakeholder in Daimler AG (DAI), the owner of Mercedes-Benz, spending EUR1.95 billion on a 9.1% stake in the German company.

In February IPIC said it would acquire NOVA Chemicals Corp. (NCX) for $2.3 billion.

"The significant partnership not only falls in line with Abu Dhabi's larger plans for technology research and science at a grassroots level but also complements its aim to be the international tourism capital of the region," said Khadem Al Qubaisi, Aabar's chairman.

The venture is in the final stages of developing commercial sub-orbital space vehicles, which will also accommodate scientific research.

The Virgin Group has invested over $100 million in Virgin Galactic since its establishment in 2004. Scaled Composites, an aeronautical firm owned by Northrop Grumman, is producing the company's new space vehicles.

The new spacecraft in development, SpaceShipTwo, will operate a test flight program before the end of 2009, Tuesday's statement said.

Aabar shares closed down 2.2% Tuesday to AED2.26 in a slightly positive market.

Disclosure: Author does not own any of the stocks discussed here.

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