Saudi Arabia becomes socially acceptable in Germany
When the journalist Jamal Khashoggi was strangled, sawed up and packed in plastic bags in the Saudi Arabian consulate in Istanbul in October 2018, international business partners distanced themselves from the Saudi crown prince and de facto head of state Mohammed bin Salman for a while. Those days are long gone. Saudi Arabia is a respectable investor. If any proof of this were needed, it would be the billion-euro investment by the Saudi sovereign wealth fund PIF (Public Investment Fund) in the German lift manufacturer TK Elevator.
For a while, there was a hierarchy in Germany when it came to Arab investors: Abu Dhabi, Kuwait and Qatar were welcome everywhere. Saudi Arabia, on the other hand, usually only appeared as a cornerstone investor in IPOs such as that of Thyssenkrupp's hydrogen subsidiary Nucera. Its electrodes end up in electrolysers in Saudi Arabia's city of the future, Neom, where ex-Siemens CEO Klaus Kleinfeld was appointed Chairman. And ex-RWE boss Peter Terium is building a green hydrogen production facility in Neom for 5 billion dollars.
Fresh capital needed
New access to Germany is now opening up for Saudi Arabia via private equity investors who need a partial exit from their investments so that they can repay their institutional backers. In this case, it is Advent and Cinven who want out of TK Elevator. The sovereign wealth fund PIF not only acts as an assistant in preparing the exit of the private equity firms. It must also be welcomed by the company itself as a buyer of the new shares in the capital increase. According to data from the rating agency S&P, TK Elevator has a whopping 13 billion euros in debt. That is eight times the operating profit. So you can't be squeamish in your choice of helpers. Otherwise, you will never make it to the stock exchange, which does not accept such high levels of debt.
It's just a shame that part of the production is moving to the Gulf in return for the capital injection. Saudi Arabia's 1 trillion dollar sovereign wealth fund PIF is increasingly using its money to encourage foreign companies to invest in the Kingdom. Like TK Elevator, Chinese computer manufacturer Lenovo and Japanese investor Softbank also came to the country with production in exchange for capital. This is helping to fulfil the crown prince's ambitious Vision 2030, and diversify the economy away from oil.
