GE, Abu Dhabi firm in $8 bln joint venture

BOSTON (Reuters) - Conglomerate General Electric Co (GE.N) and Abu Dhabi investment agency Mubadala Development Co said on Tuesday they have entered into an $8 billion joint venture that will initially focus on providing commercial finance in the Middle East and Africa.

The two companies said they also plan on working together in the clean energy and water, aviation, and oil and gas sectors.

The action reflects GE's strategy of shifting its financial operations away from volatile segments such as those influenced by U.S. consumer spending toward areas of higher growth.

Shares of the second-largest U.S. company by market capitalization have been battered this year because of concerns about its consumer and commercial finance units.

"What it allows us to do is get good geographic and asset spread of risk, but more importantly it allows us to reallocate to higher-return opportunities in commercial finance," Jeff Immelt, chief executive of GE, said on a conference call with reporters.

Over the next 18 months the companies plan to invest about $40 billion in commercial and infrastructure projects in the region, GE's fastest-growing market.

PLANS FOR TOP-10 STAKE

The companies said Mubadala "plans over time" to become one of GE's 10-largest shareholders by acquiring shares in the open market.

"It makes a lot of sense for us to become shareholders in GE," said Mubadala CEO Khaldoon Al Mubarak. "We like the company. We think that under Jeff's management this is an institution that has done extremely well."

Al Mubarak said Mubadala has no stake in GE at this time, and he declined to specify a timeframe for when his company would become a major GE shareholder.

The companies also aim to establish a clean energy technology center in Masdar City, a new city in Abu Dhabi that aims to be carbon neutral. GE plans to commit up to $50 million for Masdar's second clean-tech fund.

Growth in the Middle East has been a major focus for GE in recent years. Last year the company generated $5 billion in revenue in the region, up 50 percent from the prior year.

Morgan Stanley advised Fairfield, Connecticut-based GE on the deal, while Lehman Brothers and Goldman Sachs advised Mubadala.

GE shares closed up 81 cents, or 2.9 percent, at $28.50 on the New York Stock Exchange. So far this year, GE shares are down about 23 percent, a steeper drop than the 12.5 percent slide of the Dow Jones industrial average .DJI .

(Additional reporting by Paritosh Bansal; Editing by Mark Porter, Derek Caney, Toni Reinhold)