Daimler has welcomed Aabar Investments of Abu Dhabi as a major investor and said it was increasing its share capital by about 10% with exclusion of subscription rights of existing shareholders.

After acquiring new shares, Aabar will hold around  9.1% of the new share capital in a deal approved by Daimler’s Supervisory Board today.

Aabar is an investment company headquartered in Abu Dhabi and listed on the Abu Dhabi Securities Exchange. It directly invests in various sectors including energy, infrastructure, real estate, automotive and financial services companies. Its largest stakeholder is the International Petroleum Investment Company (IPIC), which in turn is wholly owned by the Abu Dhabi government.

The capital increase would be carried out by issuing 96,408,000 new registered no par value shares of Daimler’s authorised capital as approved by the annual shareholders´ meeting last April. The issue price of the shares is EUR20.27 per share, resulting in an equity contribution for Daimler of EUR1.95bn.

Daimler chairman Dieter Zetsche said in a statement: “We are delighted to welcome Aabar as a new major shareholder that is supportive of our corporate strategy.”

Aabar chairman Khadem Al Qubaisi said: “Daimler is an iconic brand and a financially strong company with a reputation for excellence worldwide. We are delighted to have the opportunity to make this investment and are excited by the commercial potential of our partnership.”

Daimler said future cooperation with its new investor would focus on joint initiatives in electric vehicles and associated CO2-emissions reduction; development and/or production of innovative compound materials to be used in automotive manufacturing and social projects such as the establishment of a training centre in Abu Dhabi to educate young talent for positions in the automotive industry.

“The cash inflow from the capital increase of EUR1.95bn will further improve Daimler’s sound financial position,” the automaker added.

Abu Dhabi joins Kuwait as a major Daimler shareholder Kuwait now holds 6.9%, down from about 7.6% to the capital increase.

The German government backed the deal with Abu Dhabi, saying it showed long-term growth prospects for the German auto sector were good. A German government spokesman described the purchase to Reuters as a “positive signal”.

Analysts, however, told the news agency they worried the deal might mean the German carmaker was having a tougher time than previously thought.

“Daimler’s action might raise questions on management’s perspective on 2009,” analysts at Commerzbank, which rates the stock “add”, wrote in a client note cited by Reuters.

“However, in the current environment we believe the fact that Daimler has access to equity is a strength and we would buy into any potential weakness of the share price.”

“The lack of premium and the exclusion of existing shareholders will likely increase concerns about Daimler’s financial and strategic position,” UBS analysts wrote, keeping their “sell” rating on the stock.

“The Daimler deal also highlights in our view the need for creative approaches as existing shareholders’ appetite for recapitalisation without structural change is likely limited.”

“We are not surprised by the capital increase and indeed expect similar moves from all European (carmakers) unless the environment improves sharply and soon,” Morgan Stanley said, maintaining an “overweight” rating on Daimler stock.

“This move shows that having a positive net auto cash position does not necessarily prevent the risk of equity dilution.”