Citadel Capital of Egypt May Spend Up to $500 Million

By Mahmoud Kassem

May 12 (Bloomberg) -- Citadel Capital, an Egyptian private- equity firm that has $8.3 billion in investments, may spend as much as $500 million in industries including mining and agriculture in the second half as asset prices become more attractive in the Middle East and Africa.

“It could be as little as $50 million and as much as $500 million,” Hisham El-Khazindar, managing director and co-founder of the Cairo-based firm, said in an interview at his office on May 7. Expectations of sellers “are now at reasonable levels vis-à-vis the inflated expectations that may have existed a year, a year and a half ago,” he said.

Private-equity firms are struggling to raise funds as the credit crisis makes it harder to finance acquisitions. The firms have announced $26 billion of acquisitions this year, less than a quarter of the deals led in the same period a year earlier, according to data compiled by Bloomberg. The crisis is also making asset sales less lucrative.

Private-equity investors in the Middle East manage more than $25 billion, Dubai-based buyout firm Abraaj Capital Ltd. said in October. “There is no doubt that the fund-raising environment is more challenging for everyone,” El-Khazindar said. “Whether we’ve bottomed out already or we’re close to bottoming out, it’s very clear that valuations are compelling.”

‘Significant Opportunities’

Citadel, which controls 19 companies operating in the region, will tap the $900 million it raised in the second half of 2008 from investors mostly in the Persian Gulf to fund its spending, he said. The firm will probably use some of the money to finance existing businesses in other industries it works in such as energy, transport and financial services, and may buy distressed companies or publicly traded ones, El-Khazindar said.

“We like industries where we can create players that not only will be significant players at the local regional level but that will also be globally competitive,” he said. “When you look at Egypt, when you look at Algeria, when you look at Libya, when you look at Sudan but being mindful of sanctions etc., when you look at Ethiopia, Syria, Iraq, there are very significant opportunities.”

Citadel secured 250,000 acres of agricultural land on the Nile in Sudan in February on a 99-year lease basis at $0.5 per acre annually with full irrigation rights and will grow crops such as maize, sorghum and sugar, he said. Citadel’s mining company Asek Co. for Mining said this month it won a concession in Sudan to mine for limestone that will provide raw material for Citadel’s cement company.

Egypt, Saudi Arabia and the United Arab Emirates were the largest recipients of private equity investment in the Middle East for the past four years, according a report by the Gulf Venture Capital Association in March.

It’s unlikely that Citadel will take any companies public in 2009 and 2010 because of unfavorable market conditions, El- Khazindar said. The firm has also put its own plans to sell shares to the public on hold, he said.

To contact the reporter responsible for this story: Mahmoud Kassem at mkassem1@bloom