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Mubadala Capital, the asset management arm of Abu Dhabi’s state investment fund, is acquiring a large stake in a US-based credit manager as it seeks to build a global player in private capital based in the Middle East.
The firm is buying a 42 per cent stake in Silver Rock Financial, a Los Angeles-based credit investment specialist backed by the family office of onetime “junk bond king” Michael Milken and led by executives who used to manage the billionaire’s sprawling portfolio of private investments. Mubadala will also take in an investment from Milken’s family office, accepting outside equity for the first time.
The deal underscores Abu Dhabi’s growing ambition to not just passively invest its ample capital in ventures around the world but also to manage and guide decisions and deals for others.
In an interview with the Financial Times, Mubadala chief executive Hani Barhoush called the tie-up, which will be formally announced later on Thursday, a significant milestone.
“Our strategic objective since we were established was to build a significant Abu Dhabi-based third-party asset manager,” said Barhoush. “We are pretty advanced, but there is still a long way to go and a lot of room to grow.”
Silver Rock, which manages about $10bn in assets with a speciality in structured products and high-yield debt investments, will push Mubadala Capital into the fast-growing arena of private credit investments.
Mubadala Capital manages about $27bn in assets, with about $18bn managed on behalf of third-party investors such as Milken’s family office M-Cor and large institutions. It also manages about $9bn of cash coming from the balance sheet of its majority owner Mubadala Investment Company, the $302bn state investment fund.
Typically, local sovereign wealth funds and wealthy individuals in the region have invested in private markets through US- and European-based groups such as Apollo, Blackstone, CVC and KKR. However, Mubadala decided to create the independent Mubadala Capital unit in 2011 with the goal of it becoming large and skilled enough to attract outside investment dollars.
Under Barhoush and chief investment officer Oscar Fahlgren, Mubadala Capital has invested heavily in private equity and venture capital deals, backing companies such as high-end stroller maker Bugaboo and Arbol, a start-up focused on climate risk insurance. It also has invested heavily in Brazil and is providing structured equity financing to strong companies with overleveraged balance sheets.
Over the past 18 months, Mubadala Capital has quickened its investment pace, emerging as a dealmaking force in the Middle East.
Its funds acquired a majority stake in Fortress Investment Group for about $3bn in May and recently announced a C$12.1bn ($8.6bn) deal for CI Financial, a large asset manager.
The group’s deal for Silver Rock, however, is its first strategic acquisition.
Mubadala Capital will pay with a mixture of cash and stock. Existing equity owners of Silver Rock, including chief executive Carl Meyer and Milken’s family office, will take minority equity interests in Mubadala Capital at an undisclosed valuation. Separately, Mubadala Capital will also invest more than $1bn into Silver Rock’s funds.
Mubadala and Silver Rock have worked on previous deals together, including a 2012 takeover of EMI Music Publishing, which they sold to Sony for $4.75bn in 2018.
Other areas of strategic expansion could eventually include infrastructure or strategies dedicated to buying private equity fund stakes, said Fahlgren.
