Dubai state investment agency mulls U.S. purchases

By Daliah Merzaban

DUBAI (Reuters) - Investment Corporation of Dubai, an agency which pools some of the Dubai government's biggest holdings, said it is looking to benefit from the U.S. mortgage crisis to buy into troubled U.S. financial services companies.

"What's happening in the States is going to create a lot of opportunities," Mohammed Shaibani, chief executive officer of the Investment Corporation, told reporters. "In financial services, we are evaluating the situation."

Shares of Merrill Lynch & Co MER.N, the U.S. bank which wrote down $8.4 billion of assets during the third quarter because of subprime mortgage defaults, were "still expensive," Shaibani said. The shares have plunged 42 percent since June 1.

Shaibani said the same of Citigroup (C.N), the largest U.S. bank, which has written down at least $13 billion and whose shares have also tumbled.

"We would be interested" were the shares to fall further, Shaibani said on the sidelines of a bankers' meeting in the Gulf Arab emirate. "We'll be very selective," he said of possible acquisitions in the United States.

Investment Corporation owns stakes in companies such as Emaar Properties EMAR.DU and Dubai Financial Market Co DFM.DU, which are benefiting from record oil income to the Gulf Arab region to make foreign acquisitions.

Dubai Financial Market Co is a part of Borse Dubai which expects to complete its $4.9 billion take over of Nordic and Baltic bourse operator OMX OMX.ST by the end of February.

"We will be looking at the overall strategy and privatization plan for Dubai," Saad Abdul Razak, managing director of Investment Corporation, told Reuters earlier on Tuesday.

INVESTMENT ARM

Abdul Razak, who stepped down last month as chief executive officer of Dubai Islamic Bank DISB.DU, likened Investment Corporation to Singapore's state-run Temasek Holdings TEM.UL, which manages about $160 billion of assets.

"You need to have one consolidated investment arm," Abdul Razak said. "We are open to all markets, and we will invest in the U.S., Europe and Asia," he said, declining to be more specific.

Investment Corporation would look at selling stakes in state-owned entities either through initial public offerings or private placements "when the market is right", Abdul Razak said.

Emirates Airline EMAIR.UL said last week its intends to sell as much as 30 percent in an IPO to help finance more than $60 billion of aircraft purchases. Investment Corporation would advise on any sale, "but it will take a bit of time," Shaibani said.

The Dubai government agency that bought into Deutsche Bank (DBKGn.DE) this year said on Monday it could invest in U.S. banks, property and other sectors after the dust settles on a mortgage crisis that has cut asset prices.

Banks that have reported losses from defaults on subprime, or high-risk mortgages, could be among the targets for DIFC Investments, which is helping drive Dubai's push to build two of the world's ten largest financial institutions in eight years.