Mubadala to Acquire Majority Stake in Fortress Investment Group

Decks have been cleared for Mubadala Capital’s $3 billion bid for Fortress Investment Group, a powerhouse investor in the credit markets with a large bet on the US rail infrastructure, has cleared a significant regulatory hurdle after the parties agreed to important concessions.

The Committee on Foreign Investment in the US (CFIUS) had approved Fortress’s sale of majority stake to Mubadala, the investment arm of Abu Dhabi, which has almost $300 billion assets under management sovereign wealth fund, London-based Financial Times reported, citing three people briefed on the matter.

The clearance comes after Mubadala agreed to let the investment group commit to keeping data and technology inside the US, on top of an earlier pledge to waive day-to-day control over Fortress. The new concession comes as Washington is increasingly focused on protecting US intellectual property, spanning cyber security software and data algorithms, the report, quoting sources, noted.

Gaining approval from CFIUS marks a significant milestone in closing a transaction that was first agreed roughly in March last year with Japan’s SoftBank, which is the current owner of Fortress.

By agreeing to waive the day-to-day control over Fortress, which manages $48 billion in assets on behalf of more than 1,900 institutional investors and private clients, Mubadala has struck a similar arrangement to that agreed by SoftBank when it purchased the firm in 2017.

The Financial Times first reported that CFIUS was scrutinising the transaction in July last year amid concerns in Washington over the UAE’s ties to China. The deal has been seen as a test of officials’ comfort with large Middle Eastern funds taking direct ownership of US investment groups.

However, Fortress, Mubadala and the US Treasury Department declined to comment, Financial Times said and added that the private market assets under management have grown nearly 20% a year since 2018 and reached $13.1 trillion as of last June.

Credit Investment Arena

The Fortress deal will propel Mubadala, which is run by chief executive Khaldoon al-Mubarak, into the ranks of the world’s largest credit investors.

After transaction close, Fortress management is expected to own a 30% equity interest in the company and will hold a class of equity entitling Fortress management to appoint a majority of seats on the board. Mubadala Capital (which currently holds a 9.99% stake in Fortress through its Private Equity Funds II and III), will own 70% of Fortress equity.

After the closing, Fortress will continue to operate as an independent investment manager under the Fortress brand, with full autonomy over investment processes and decision making, personnel and operations.

Under the new joint ownership, Fortress is expected to generate significant value for its stakeholders by further establishing itself in the alternative investment space, particularly in credit and real estate across public and private markets.

Fortress is expected to benefit from Mubadala Capital’s global network and extensive portfolio of diversified assets, as well as its access to proprietary investment opportunities to support its growth and expansion.

Mubadala’s US Investments

The UAE’s sovereign wealth fund’s other investments in the US include in Procore, a cloud-based construction software, in Chime and Goodleap, two fintech firms, in Recursion Pharma, a clinical-stage biotechnology company among others.