Citadel of Egypt may sell investment, List Taqa shares as market improves

Citadel Capital Corp. may sell at least one investment by year-end and list one of its oldest energy units by June, the chief financial officer of Egypt’s largest publicly traded private equity firm said.

Citadel, which invests in energy, mining, cement, agriculture, transportation and retail businesses across the Middle East and East Africa, posted a second-quarter loss of 95 million Egyptian pounds ($16.7 million), the second consecutive quarterly loss since the company listed on the Egyptian exchange in December. Profit for the three months was 300,000 pounds on a standalone basis, which excludes early-phase investments.

“We aren’t going to exit just to make the numbers look good,” Chief Financial Officer Ahmed El Shamy said in an Aug. 25 interview in Cairo. “But we are considering making these exits when we feel we can maximize value for our shareholders.”

Citadel shares have lost 44 percent since they started trading Dec. 7, compared with a 1.4 percent increase for Egypt’s benchmark EGX30 Index. They slipped 0.3 percent to 6.72 pounds at the 1:30 pm. close in Cairo yesterday, valuing the company at 4.45 billion pounds. The shares are up 6.8 percent this quarter.

The Cairo-based firm, which controlled $8.3 billion in investments as of June, made its last full exit of an investment in June 2007 with the sale of Egyptian Fertilizers Co. to a group of investors led by Dubai-based Abraaj Capital Ltd. for $1.41 billion. Citadel’s initial 2005 investment in the fertilizer producer was less than $400 million, he said.

“That’s the type of exit that turns around the whole picture,” El Shamy said. He declined to identify the investment Citadel plans to sell this year.

On Hold

A sale of the magnitude of Egyptian Fertilizers is unlikely in the next year, said Hatem Alaa, an equity analyst at Cairo- based HC Securities.

Citadel, which first said it would sell shares of its oldest energy unit, Taqa Arabia, in September, has held off making the decision until market conditions improve. The business is one of Citadel’s best selling opportunities, according to Alaa.

“Taqa is one of the most well-structured and operational of their investments, so it makes sense to sell it,” Alaa said in a telephone interview. “But it will come down to market conditions and investor appetite.”

The company in the near term will favor so called green- field investments, or projects that it initiates from scratch, over acquiring existing companies, El Shamy said.

“We had a choice to make three or four years back, either to acquire existing assets or go for green-fields,” El Shamy said. “Acquisitions then were expensive, so we decided on green-fields. That choice is contributing to our consolidated losses now, but we will be much better-off two or three years down the line as these investments enter the growth phase.”

Among Citadel’s green-field assets is Egyptian Refining Co., a planned $3.7 billion oil refinery that will be built in the greater Cairo area and produce 4 million tons of refined products when completed. Production is scheduled to begin in 2015, El Shamy said.

(Source: bloomberg)


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