Citadel Capital Sees Higher Revenues From Egyptian Currency Depreciation

Leading private equity firm Citadel Capital (CCAP.CA) said it hopes to raise $300 million from divesting non-core assets within three years, Founder and Chairman Ahmed Heikal said in an interview with Reuters today.

He predicted that some of the company’s businesses would benefit from an export boom because of the weak Egyptian pound.

The pound has tumbled about 8% to record lows against the US dollar since late December, when the Central Bank of Egypt (CBE) softened its defense of the currency, which is under pressure because of the country’s political and economic turmoil.

Citadel, one of Africa’s largest investment firms managing $9.5 billion worth of assets, has stakes in companies which export over $300 million a year across different businesses, including food, Heikal said.

“Currency devaluation is affecting our business positively. If you are investing in an exporter or import substitute, then you’ll benefit,” Heikal said.

“We expect that (exports) will be increased substantially rather than go down.”

Since the ouster of president Hosni Mubarak in early 2011, Egypt’s transition to democracy has been plagued by conflict between Islamist and secular forces, disrupting the economy and leading to capital flight.

“We took a view a long time ago that Egypt will go into tough conditions. Since we saw it coming, we positioned our portfolio to have investments that will be least affected, if not positively affected, by what’s happening,” Heikal said.

As part of its strategy to focus on core businesses, Citadel plans to sell its stakes in eight firms and focus on five industries: energy, transportation and logistics, agriculture and consumer foods, mining, and cement manufacturing.

The company will sell its stakes in an “orderly manner” and may take up to three years, depending on market conditions, Heikal said.

“Given the restrictions that are there in the region on capital, we need to focus and grow only a select number of our companies. Those five sectors offer the best risk/return for shareholders.”

The company expects to raise $300 million from the sale of non-core portfolio companies worth a total of $1 billion.

Citadel narrowed its third-quarter net loss by 13.4 % from a year earlier to $22 million.

The company has said it sees great opportunities in Africa, given growth in population, the supply of natural resources and improving governance in target countries such as Mozambique, Ethiopia and Kenya.

Mubasher