French state arm CDC IC ramps up Mubadala partnership

The agreement was signed during the official visit of French president Emmanuel Macron in Abu Dhabi in early November.

Part of the French state's investment arm Caisse des Dépôts, CDC IC is dedicated to direct investments alongside sovereign funds and other large international institutional players. It inked its first direct investing partnership with Mubadala in 2014, with €300m deployed in the space of three years. It notably took a stake as a minority investor in the sale of French private nursing homes operator DomusVi by PAI Partners earlier this year.

Under the terms of this renewed partnership, CDC IC and Mubadala have each committed €250m. The structure will only target direct investment and will not invest in a fund-of-funds capacity, unquote" understands. It will look to acquire active minority stakes in healthcare, education, elderly care and real estate businesses, and will be able to co-invest alongside private equity funds.

CDC IC will mainly be sourcing and executing investments, liaising with Mubadala throughout, while the latter will also be able to flag up potential investment opportunities sourced via its own network.

In addition to the €500m expansion of the direct investment programme, Mubadala has also entered into a venture-focused agreement with another French state arm, BPI France. This programme also has an investment capacity of up to €500m, this time focused on startups and more mature technology companies. It will not only target direct investments, but will also be able to act as an LP in venture capital funds – although a precise split between the two has not been decided at this stage, unquote" understands. The programme will focus on information and communication technologies, biotech, cleantech and other technology sectors.

Ramping up
This new agreement highlights how France has increasingly been looking to strike direct investment partnerships with sovereign wealth funds – a strategy the country is likely to intensify as its economy builds momentum and its technology sector in particular attracts increasing interest from international investors.

CDC IC has now built up seven partnerships with international investors, for a total capacity of nearly €4bn. Besides Mubadala, its co-investment partners include Qatar Investment Authority, Russian Direct Investment Fund, China Investment Corporation, Korea Investment Corporation, and Saudi Arabia's Kingdom Holding Company.

Building these partnerships has required a delicate touch, however, especially in a country usually thought of as fiercely protective of its economic independence. "The French authorities have identified the potential of sovereign wealth funds as investment partners for nearly a decade now," says Laurent Vigier, CEO of CDC IC. "These institutions are sophisticated global investors that have become increasingly professional; we can attract them only if adopting a patient, partnership-led approach. The goal is to target investment returns in line with market standards, without ulterior considerations or looking for specific externalities."

Mubadala is Abu Dhabi's strategic investment company, with $125bn in assets. Beyond the partnership with CDC IC, the sovereign wealth fund is also familiar with another heavyweight French investor: Ardian invested a total of $2.5bn in a transaction with Mubadala Capital, via a secondaries deal and a primary commitment to a new fund, in 2016.

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