Abu Dhabi partners with Virgin Galactic spaceship firm

DUBAI, United Arab Emirates -- The Mideast investment fund that recently bet big on Mercedes-Benz said Tuesday that it will pay about $280 million to buy nearly a third of commercial space travel start-up Virgin Galactic.

Aabar Investments' buy-in gives British billionaire Sir Richard Branson's space tourism venture a big financial kickstart at a time when many funding sources have dried up because of the global recession. It also gives the wealthy Persian Gulf sheikdom of Abu Dhabi a chance to build its own space flight industry as it broadens its economy beyond the oil sector.

Aabar will buy a 32% stake in Virgin Galactic's holding company.

In exchange, the state-controlled fund will acquire "exclusive regional rights" to launch Virgin Galactic tourism and scientific research space flights from the United Arab Emirates capital.

"The significant partnership not only falls in line with Abu Dhabi's larger plans to inculcate technology research and science at a grassroots level but also complements its aim to be the international tourism capital of the region," Aabar Chairman Khadem al-Qubaisi said.

Aabar says it plans to pay an extra $100 million plus transaction costs to fund a program to launch small satellites into orbit, and will build a spaceport in Abu Dhabi.

Aabar is the first outside investor in the spaceflight company, which has been owned fully by Branson's Virgin Group. The deal values Virgin Galactic at about $875 million.

Regulators in the United States and elsewhere must approve the deal.

Virgin Group has pumped more than $100 million into its space flight venture since forming it in 2004. The company is working to develop flight vehicles with Scaled Composites, the Mojave, Calif.-based aeronautical firm that won the X Prize to build the first privately funded manned space ship.

Virgin Galactic has yet to show that it can put paying customers in orbit, or make a profit doing so. It plans to begin testing a new spacecraft, SpaceShipTwo, by the end of this year. The vehicle will piggyback to 50,000 feet on a large plane before blasting into suborbital space.