Citadel brings in Citi to advise on sale options

Citadel Capital moved a step closer to selling a stake in itself on Tuesday, appointing Citigroup to advise on strategic options. Two days later, it won approval to vote on a $175m rights issue.

Cairo-headquartered Citadel Capital, which is publically traded on the Egyptian stock exchange, has been the subject of intense speculation since it revealed in June that it was in “early stage, verbal talks” with “more than one potential strategic investor regarding the possible sale of shares in Citadel Capital”.

In a statement made on Tuesday, the group revealed it had formally mandated Citigroup as financial adviser, “to look into all the strategic alternatives available to the firm and to provide guidance on any possible acquisition offers”.

On Thursday, it won approval from the Egyptian regulator, the Egyptian Financial Supervisory Authority (EFSA), to hold an extraordinary general meeting to vote on a rights issue. The EFSA had earlier denied Citadel permission, saying the firm's disclosure was incomplete, according to a spokesman. Since then, the firm has worked with the EFSA to fulfil the necessary criteria. Shareholders will now meet in Cairo on August 3 to vote on the rights issue.

A successful rights issue would not preclude a stake sale, however. A spokesman said: “Like any public company, the board of Citadel Capital, which represents shareholders, has a fiduciary obligation to look at any bona fide offer for the firm. This is irrespective of the successful completion of the rights issue.”

Dubai-based buyout firm Abraaj Capital has been repeatedly linked with a deal to acquire a stake in its MENA-region peer, with Citadel eventually confirming the two had held talks.

However, a stake sale to Abraaj is just one of many options on the table, according to a source close to the firm.

“There is a menu of options on the table. Partners within Citadel Capital who control about 32 percent of the company in economic terms have held preliminary talks with Abraaj about a deal, but that is just one of many options,” the source said.

Listed private equity groups typically trade at a discount to their net asset value, and many have come under pressure from shareholders to narrow those discounts. As a result, firms including Citadel have begun looking at ways to ensure their share price more adequately reflects the value of their assets.
Stephen Murphy, a managing director at Citadel Capital with responsibility for institutional fundraising, said: “We trade at a significant discount to portfolio net asset value (PNAV), which is obviously a concern, particularly when you consider that PNAV does not reflect any value for the asset management business, and we are the largest quoted emerging markets PE manager, with over $4 billion of committed equity capital under management.”