Qatar to sell $2.7bn worth of VW shares

Qatar Holding, the Gulf state's investment arm, plans to sell up to half its Volkswagen preference shares, raising around €1.6 billion ($2.4 billion) for other deals.

The news sent VW preference shares – widely expected to join Germany's blue-chip DAX index once VW ordinary, voting shares drop out due to low free float – down more than 12.7 per cent by 0951 GMT.

Qatar Holding said it was selling as many as 25 million preference shares in Europe's biggest carmaker "to enhance the liquidity" of the preference shares, but added it remained committed to its Volkswagen investment.

"QH intends to continue increasing its holding in Volkswagen AG ordinary shares to 17 per cent, as previously announced, subject to receipt of regulatory approvals," it said in a statement.

That would give Qatar Holding the third-largest voting stake in Volkswagen behind automotive group Porsche SE and VW's home state of Lower Saxony. At the end of August, Qatar's voting stake in VW was 6.78 per cent.

Qatar said it agreed on a lock-up period for the remainder of its non-voting VW preference shares until December 31 this year.

VW, which has around 105 million preferred shares in circulation, declined to comment on Qatar's placement. Hussein Al Abdullah, executive director of the Qatar Investment Authority (QIA), which controls Qatar Holding, could not be reached for comment.

Credit Suisse and Goldman Sachs are helping with the share sale.

Volkswagen plans to carry out a capital increase in the first half of next year. It will issue up to 135 million new preference shares in order to raise money for its planned acquisition of Porsche's sports car business.

One analyst at a Frankfurt-based bank recommended that investors looking to gain exposure to VW should wait until at least January since there were plenty of preferred shares that would soon be looking for a home.

"The stock overhang that was already there due to the capital increase has increased considerably," he said.

The voting shares traded down 3 per cent at €107.70.

Porsche in August said it was selling assets worth billions of euros to Qatar in a move to prop up its strained finances, marking a climbdown for a predator that once sought to dominate Volkswagen but ended up agreeing to a takeover by its rival.

Reuters reported in August citing sources close to the deal that Qatar had bought from Porsche options on 50 per cent of VW's preferred shares at a price of about €60 each.

Qatar owns key stakes in banks Barclays and Credit Suisse, grocer Sainsbury, publisher Lagardere and the London Stock Exchange on behalf of the Gulf state ruled by Shiekh Hamad bin Khalifa Al Thani.

When Qatar sold shares in Barclays, rumours resurfaced that it might be amassing cash to make a bid for Sainsbury, in which Qatar has a 26 per cent stake following a failed bid in 2007. Shares in Sainsbury rose 0.5 per cent.

The world's largest liquefied natural gas exporter has ramped up its investments over the summer after slowing down its overseas activity as financial markets plummeted and oil revenue fell.

Qatar's sovereign wealth fund, the parent company of Qatar Holding, said in April it intended to focus on energy, commodities, food and water in a major strategic overhaul and saw growth in emerging markets such as China and India.

However, since August the group, which is estimated to have assets worth about $60 billion, has invested in UK real estate becoming the largest shareholder in Songbird Estates.

The property arm of the country's sovereign wealth fund said on November 3 it agreed to buy the landmark US embassy building in London as part of plans to increase investment in the UK's property sector to £5 billion from £3bn ($5bn) now.

The cash-rich state is expected to keep outperforming key players in the world's top oil-producing region – Saudi Arabia and the United Arab Emirates – in the coming years thanks to massive expansion of its gas facilities.