Citadel Capital in many ways is an exemplar of the Middle East and North Africa's burgeoning private equity industry: young, rapidly expanding, ambitious, and armed with increasing amounts of capital.

But the four-year old Cairo-headquartered firm appears to be headed towards territory so far approached only by international private equity firms with decades-old track records: i.e., publicly floating its management company.

Co-founder Hisham El Khazindar told PEI that Citadel is considering a listing, but citing legal restrictions, declined to comment on how much it was seeking to raise, when it would list or on which exchange.

The firm has grown exponentially since being founded by El Khazindar and Ahmed Heikal, both former senior executives at regional investment bank EFG-Hermes. Today, the firm boasts six partners plus 15 investment professionals. It has added an office in Algeria and plans to do the same over the next three years in other core countries in which it invests, including Libya and Syria. And its assets under management have swelled to $8 billion (€5 billion).

But, says El Khazindar, “the business model hasn't changed”.

Unlike traditional private equity firms, Citadel raises funds on a deal-by-deal or “theme-by-theme” basis from its limited partners, most of which hail from Gulf Cooperation Council (GCC) countries.

He acknowledges that this puts more pressure on the firm than a typical private equity fund structure, in which an average or poor investments could be counterbalanced by extremely successful deals and still result in an excellent track record.

“You can't get away with having a dud amongst other deals,” he says. “You really have to get all of your deals right.” But he views that as a positive thing, saying it forces the firm to have greater self-discipline and carefully select deals.

“That incentive is also strengthened by the fact that we don't think of ourselves as a pure asset manager,” he adds. “In each one of these deal vehicles that we set up as a GP, we typically take in a minimum of 10 percent participation ourselves – sometimes as much as a 50 percent participation.”

Citadel's investment in its deal vehicles is typically between $30 million and $50 million, with most vehicles ranging in equity size from $100 million to $300 million.

“One of the challenges, but at the same time benefits, of raising funds on a deal by deal basis, is it really forces us to stay very close to our LPs and co-investors,” El Khazindar says. He notes they don't just interact at annual meetings or “once every blue moon when we're raising a fund”.

So far, those investors have been happy: The firm's buy-and-build strategy targeting emerging MENA markets has thus far resulted in three exits, returning nearly $2 billion in cash to investors. El Khazindar estimates the exits translate to an average of four times return on investment and internal rates of return in excess of 100 percent. “We're quite proud of that,” he says.

One of those exits remains the largest-ever deal in MENA private equity: Citadel sold 100 percent of Egyptian Fertilizers Company last summer to an Abraaj Capital-led group for $1.4 billion, including a record $1.25 billion of leverage. (Though US buyout firm Colony Capital later topped the deal size with its €4 billion agreement to buy oil company Tamoil from the Libyan Government, the deal has since fallen apart.)

El Khazindar says the future for his firm lies in continuing its strategy of building regional market leaders, targeting industries including oil and gas, food service, logistics and agriculture.

Emerging markets private equity firm Aureos Capital has taken a 30.4 percent stake in South African IT company Sandbox. The firm is investing R32 million ($4 million; €2.6 million) in Sandbox and has been joined in the deal by undisclosed black economic empowerment partners, who have taken a 20.4 percent stake in Sandbox as co-shareholders. Sandbox has an annual turnover of R100million and helps integrate software for clients mainly in the financial sector.

Mohamed Layas, chairman of Libya's state investment arm, has reportedly said “there is no deal” to sell a majority stake in oil refiner and distributor Tamoil to Los Angeles private equity firm Colony Capital. The deal talks had been regarded as a sign of the ongoing liberalisation of the Libyan economy. However, an agreement by Colony Capital to purchase a majority stake in Tamoil, an oil refiner and distributor owned by the Libyan Government, is no longer proceeding according to news agency Reuters. It emerged last June that Colony had agreed to acquire a 65 percent stake in the company, which owns and operates more than 3,000 service stations across Europe. Colony said the agreement marked the second major foray by private equity into the European oil refining business in recent years. The deal valued Tamoil at €4 billion ($5.4 billion). Colony declined to comment.

The private equity unit of Egyptian bank EFG-Hermes has more than tripled its previous private equity fundraising effort, closing a $555 million (€365 million) third fund to invest in Egypt and North Africa. The firm's previous fund raised $155 million and its first fund closed on $54 million in 2000. Egyptian and regional financial institutions as well as high-net worth individuals invested in the latest fund. Samer Yassa, a partner at EFG-Hermes Private Equity, said in a statement the previous fund had returned more than 80 percent of its principal investment to investors in two years at a realised internal rate of return of more than 70 percent.


Announcement Deal Status Target Target Acquiror Deal Value Financial Sponsor
Date Nationality $ (m)
4-Jun-07 Completed Egyptian Fertilizers Co Egypt Abraaj Capital (IBO) 1,400 Abraaj Capital
20-Jun-06 Completed Amoun Pharmaceutical Co SAE Egypt Capital International Inc (IBO); 510 Capital International Inc;
Concord International Court Square Capital Partners
Citigroup Venture Capital Concord Partners
25-Jul-06 Completed EFG Hermes Investment Egypt Egypt Abraaj Capital 505 Abraaj Capital
Banking (25%)
8-Feb-06 Completed Commercial International Bank Egypt Ripplewood Holdings LLC 227 Ripplewood Holdings LLC
(Egypt) SAE (18.7%) RHJ International;
Eton Park Capital Management LP
12-Sep-07 Completed Misr Glass Manufacturing Co Egypt MGM Holdings (65% – 35%) 178 Citadel Capital Inc
Citadel Capital Inc“
2-Nov-06 Completed Challenger Ltd (40%) Libya Venture Capital Bank BSC 150 Global Emerging Markets
Global Emerging Markets
5-Sep-07 Completed Dina for Agriculture Egypt Citadel Capital Inc (IBO) 85 Citadel Capital Inc
Investments Co
11-Dec-07 Completed Veolia Environnement Morocco Caisse de Depot et de 64 Emerging Capital Partners – ECP
Maroc (19%) Gestion – CDG;Emerging
Capital Partners – ECP
4-Jul-07 Completed Compagnie Miniere de Toussit Morocco Truffle Venture (IBO); 52 Truffle Venture;
Emerging Capital Partners – ECP Emerging Capital Partners