Mubadala Development Company will invest $2 billion in a Brazilian equity fund owned by the world's 10th richest man.
Mubadala, the Abu Dhabi government-owned investment fund which has stakes in both General Electric and the Carlyle Group, said that it would buy a 5.63 per cent stake in Brazil's EBX Group, owned by billionaire Eike Batista.
EBX has interests ranging from mining to power generation, and the Mubadala deal will include indirect stakes in its subsidiaries, the two companies announced in a statement yesterday.
For its part, Mubadala is expected to use its profits to fund further acquisitions, as well as boost its presence in the fast-growing BRIC economy.
"Partnering with world-class companies is a key element of Mubadala's investment and development strategy," said Khaldoun Khalifa Al Mubarak, Mubadala chief executive and managing director.
"This well-structured transaction marks our first significant direct investment into one of the fastest growing markets and is an important step in Mubadala's development of strategic opportunities in Brazil and Latin America. We are confident that this partnership will pave the way for future collaboration."
Batista said: "This is a landmark transaction and is Mubadala's first significant direct investment into Brazil. This is the first time we have invited a strategic partner to invest at our holding company level. The investment considerably strengthens the entire group and its ability to successfully implement current and future projects."
Waddah Taha, a financial adviser at the Zarouni Group, said it was clearly a positive move for Mubadala.
"This strategic move was taken as an exploration step in Brazil from a strategic viewpoint and it is deemed a conservative approach as a prelude towards further investments in the future," said Taha.
EXB should now be planning to use the fresh funds to strengthen its financial position and pay for new ventures, said Taha.
"If we look at growth over time, I expect most of those emerging markets such as Brazil's will yield the best risk-reward formula," he said.
Growth in Brazil's GDP was 7.5 in 2010 but declined in 2011 to 2.7 per cent and it is expected to increase this year. According to IMF estimates, Brazil's GDP is expected to grow by 5 per cent and this ratio is lucrative for many Gulf investors.