STUTTGART/DUBAI - Daimler shored up its capital base and secured Abu Dhabi as a friendly investor in a deal some analysts said revealed how tough the auto industry crisis was proving for the luxury German group.
The Gulf emirate's state-controlled International Petroleum Investment Company (IPIC) bought a 9.1 percent holding for almost 2 billion euros ($2.73 billion) via its exchange-listed investment vehicle Aabar AABAR.AD.
Investors pushed Daimler's stock higher, despite a 10 percent capital increase that dilutes other shareholders, and the cost of insuring its debt against a default fell, as did that of luxury rival BMW.
But after jumping more than 8 percent, Daimler's shares pared gains to trade up 1.34 percent by 1415 GMT, in line with the DJ Stoxx European car sector index .SXAP. Daimler has lagged the index by around 7 percent this year.
Some analysts questioned what the deal meant for the rest of the sector if a financially solid company took such a step so early in a sector downturn which is threatening the existence of some of the world's major carmakers.
It is a clearly negative signal for Fiat, Renault , and PSA: If one of the strongest players in the industry resorts to raising fresh equity, what should the weaker players do? analysts at Sal Oppenheim wrote.
Aabar Chairman and IPIC Managing Director Khadem Al Qubaisi, who owns a Mercedes-Benz SLR super sports car, left the door open to buying further shares in Daimler in the future.
Any increase is subject to due diligence and subject to other things but for now we are satisfied with the 9.1 percent stake, he told a news conference, adding that he was not looking to gain a seat on the supervisory board for the moment.
The Aabar chairman said he was very positive about the outlook for the German auto industry but ruled out interest in further deals without Daimler's consent or interest.
We have selected our partner. In case Daimler is interested in buying companies or thinking about buying let's say parts (of companies), we would do it together but alone we cannot do it, he told Reuters after the news conference.
Commerzbank believed the access to capital was a sign of strength and recommeded buying into any share price weakness.
A regular target of M&A speculation, Daimler is one of the few car giants in the world without a protective shareholder. BMW is controlled by the Quandt family, which holds a combined 46.6 percent stake, while the Porsche and Piech clans own both Porsche SE (PSHG_p.DE) and a majority in Volkswagen (VOWG.DE).
Aabar wrapped up a $1.82 billion capital hike on Monday as IPIC completed its planned purchase of the second and final tranche of convertible bonds issued by Aabar for a total 5.2 billion dirhams.
The Daimler deal ssuggested the collapse in oil prices late last year has done little to diminish the financial muscle of energy exporters in the Gulf and underlined the region's significance as a potential source of private capital for blue-chip Western companies suffering under the global economic slump.
Neighbouring Kuwait saw its stake in Daimler drop to 6.9 percent from 7.6 percent as a result of the deal that installs Aabar as Daimler's largest investor.
Having studied Daimler's books over the past three to four months, Aabar agreed to buy 96.4 million new shares at a price of 20.27 euros each -- a 5 percent discount to Friday's close.
Aabar's own stock closed up 4 percent. (Editing by David Cowell)