Global Finance Community Eyeing MENA Firm’s Private Equity Model

At the World Economic Forum for the Middle East, the leading private equity firm in the Middle East and North Africa underscores a business model that has helped it return more than US$ 2.2 billion in cash to investors in just five years

Investors interested in locking-in significant returns in the medium- and long-term should not just consider investing in the Middle East and North Africa, but should also adapt strategies pioneered by top local private equity firm Citadel Capital, a senior industry executive told World Economic Forum attendees in Jordan this week.

“The World Economic Forum is taking place at a defining moment during which the leverage-based private equity model is being challenged,” said Ahmed Heikal, Chairman and Founder of Citadel Capital, the leading private equity firm in the Middle East and North Africa with 19 Opportunity-Specific Funds controlling investments of US$ 8.3 billion in 14 industries. “Achieving returns simply through high leverage is not sustainable — building companies, providing growth financing, including greenfields, is more enduring.”

“Citadel Capital is pioneering a private equity model based on being a significant principal investor that co-invests alongside limited partners” said Hisham El-Khazindar, Citadel Capital’s Managing Director and Co-Founder, who attended the Forum, where he helped lead a discussion on ‘Making Financial Systems More Robust.’

El-Khazindar told attendees, “A root cause of this crisis is mis-alignment of interests: Most managers have been mistakenly incentivized to take increasingly greater risks with their investors’ and shareholders’ money. Significantly more ‘skin in the game’ on the part of managers should be required going forward.”

El-Khazindar also challenged global moves to increase regulation of private equity investors as “excessive.”

“Business needs private equity to help lead investment out of recession,” he said. “In fact, we need it now more than ever. Disproportionate regulatory burdens on financiers of growth companies will not mitigate the risk of future crises. While targeted new rules are needed that directly address the world economy’s long-term systemic risks, it is important that the international community avoid broad sweeps that are motivated by short-term political posturing and populist discourse.”

Citadel Capital Managing Director Ahmed El Houssieny, who was also in Jordan for the Forum, praised the new role of multilateral finance institutions, including the International Finance Corporation (IFC), in providing finance for new projects.

“In these times, it is a strong vote of approval to have won the confidence of an institution such as the IFC, which last month announced it was investing in the US$ 100 million Sphinx Turnaround Fund we’re sponsoring, which is investing in distressed industrial and other assets in Egyptian small and medium-sized enterprises. Again last week, it announced an investment in the Citadel Capital Joint-Investment Fund,” said El Houssieny.

MENA, El Houssieny said, is full of potential for other investors to tap. “The region is laden with opportunities for investors who know where to find them,” El Houssieny told investors and economic officials. “A slowdown in growth today does nothing to diminish our broader term investment rationale; the challenge is correctly buying into these opportunities. Under the current conditions, we are pursuing an incremental approach that allows us to lock in large, attractive investment opportunities with very little in the way of up-front capital commitments,” El Houssieny noted.

“The World Economic Forum is a great opportunity for global business and economic leaders to gather in a non-competitive environment and have an open discussion on the ways out of the economic crisis. Citadel Capital continues to support initiatives such as the Forum because we believe that there is ample space for cooperation rather than competition,” he concluded.

—Ends—

Citadel Capital is the leading private equity firm in the Middle East and North Africa. The firm focuses on building regional platform investments throughout the region in selected industries through acquisitions, turnarounds, and greenfields executed via Opportunity Specific Funds. Citadel Capital’s 19 OSFs now control Platform Companies with investments worth more than US$ 8.3 billion in 14 industries, including mining, cement, transportation, food and energy. Since 2004, the firm has returned more than US$ 2.2 billion in cash to investors, more than any other private equity firm in the region.

For more information, please contact:

Ms. Ghada Hammouda
Head of Corporate Communications,
Citadel Capital (S.A.E.)

Tel: +20 2 2791-4440 • Fax: +20 22 791-4448
Mobile: +20 16 662-0002