Abraaj Captial is said to be in talks to buy stake in Citadel of Egypt

Bloomberg | 8 June 2011

NB: On 26 July 2011, Citadel announced that the talks ended

Both Abraaj and Citadel have been actively pursuing investments in farmland in recent years. In 2009, the Financial Times reported the Abraaj had acquired over 300,000 ha of land in Pakistan. Citadel owns an 11,000 cow dairy farm in Egypt (see photo above) and 200,000 ha of farmland in Sudan. (Photo: Ronald de Hommel)

By Alaa Shahine, Mahmoud Kassem and Ahmed A Namatalla

Abraaj Capital Ltd., the Dubai-based private equity company managing about $6.2 billion, is in talks with Citadel Capital SAE to buy a stake in the Egyptian firm, three people with knowledge of the talks said.

The shares of Citadel climbed the most this month, gaining 5.1 percent to 5.95 Egyptian pounds at the 2:30 p.m. close in Cairo, valuing the company at 3.9 billion Egyptian pounds ($656 million), according to data compiled by Bloomberg. The shares have tumbled 35 percent this year.

Abraaj hasn’t made an official offer to Cairo-based Citadel, according to the people, who asked not to be identified because the talks are private. Abraaj is seeking more than a 25 percent stake in the Egyptian company, one person said. Citadel Chairman Ahmed Heikal declined to comment when contacted by Bloomberg News today. A spokesman for Abraaj, speaking on condition of anonymity in line with company policy, said the firm had no comment.

“Assuming the news is correct, this is a big deal for Citadel,” said Ahmed Badr, a Dubai-based analyst at Credit Suisse Group AG, who has an “outperform” rating on the Egyptian company. “The rise in the stock price shows the market is expecting Abraaj will buy at a premium.”

Africa Access

Citadel climbed 20 percent last week amid speculation the firm had received an offer for its shares at 8 Egyptian pounds.

The firm “has not received a direct offer of acquisition from any party, nor has it received information from its shareholders suggesting that a formal offer has been presented to any of them,” Citadel said in a statement today. “We further note in this context that as is the nature of private equity firms, Citadel Capital SAE is frequently in negotiations to divest or acquire investments.”

The company said on May 31 it had a consolidated loss of $241.7 million in 2010 because two oil exploration investments were “underperforming.”

A stake in Citadel would help Abraaj expand into sub- Saharan Africa. The Egyptian firm’s investments in 15 industries include a stake Rift Valley Railways Ltd., the operator of the Kenya-Uganda rail line. It also has investments in Sudan, according to its website.

“Citadel has very interesting assets in Africa and if you want to get exposure to logistics, transport, consumer products and agriculture, it becomes an attractive target,” Badr said.

Abraaj’s investments in Egypt, according to its 2010 annual report, include Al Borg Laboratories and AgroCorp, an agriculture company focused on the farming and processing of artichokes.

Abraaj and investors such as Egyptian billionaire Naguib Sawiris have said a wave of popular uprisings that has swept the Middle East this year will help create investment opportunities and stronger economic growth prospects in the long term. The revolts have toppled the presidents of Egypt and Tunisia and spread to countries including Yemen, Syria, Libya and Bahrain.

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