100% subscribed capital increaseallows Citadel Capital to acquire majority control of most core subsidiaries, a major step towards the firm’s transformation from a hybrid private equity firm into a fully-fledged investment company
Citadel Capital the leading investment company in Africa and the Middle East, has today closed the second and final subscription on its rights issue of 528 millionUSDbringing its total paid-in capital up-to $1.15bn.
This will allow Citadel Capital to take majority stakes in most of its subsidiaries companies in the five core industries it invests in energy, transportation, agrifoods, mining and cement. Non-core subsidiaries will be divested over the coming three or more years.
“This is a major landmark towards our transformation into a fully-fledged investment holding company,” said Ahmed Heikal, Chairman and Founder of Citadel Capital. “From a capital-intensive hybrid private equity business”.He continued our list of focus industries has become narrower but our risk profile has also reduced. Our major goal however remains the same to become to Africa’s leading investment vehicle in infrastructure and resources, through the creation of shareholder value above all else.”
The transformation, said Citadel Capital Co-Founder and Managing Director Hisham El-Khazindar, will substantially strengthen the firm’s balance sheet while simultaneously delivering focus and clarity.
“Liquidity from the exit of non-core investments at the right time and valuations will strengthen our balance sheet, which has swollen in the first instance through our acquisition of majority stakes,” El-Khazindarsaid. “This enhanced balance sheet will make us more capital efficient going forward by allowing for better financing options. We will, moreover, be better able to make use of our cashflows: With majority or 100% ownership, a rebalancing of the mix between operational companies and greenfields will allow free cash generated by more established companies to fuel growth-phase investments — and reduce our reliance on external funding.”
The focus on five core industries will allow management to concentrate its emphasis on those companies it knows best (and that have the strongest growth prospects), El-Khazindarsaid, while the fact of the firm’s consolidated financial statements becoming the true measure of financial performance will make the firm easier to value and understand.
“All of this is about creating value for shareholders, deleveraging and building cash balances. Our three priorities for the rest of this year and into next are: the divestiture of non-core assets; the continued mitigation of operational and financial risk; and institutionalization,” said Heikal.
“On the divestiture front, we look forward to soon closing the sale of the Sudanese Egyptian Bank, the first of several non-core assets we aim to divest this year,” Heikal noted. “Proceeds from the exits of non-core holdings will, among other things, help us further mitigate risk by allowing us to optimize our debt structure, re-invest capital into our core-investments and generally strengthen our balance sheet.
“The third plank of our program for the year is perhaps the most fundamental and, in many ways, is the bedrock upon which the others rest, and that’s our very sharp focus on institutionalization, with a particular emphasis on corporate governance. We firmly believe that the creation of shareholder value can be made sustainable only when shareholder rights are protected and when management is backed by the systems and practices that allow us to mitigate risk. We look forward to announcements in this respect of new hires, new systems, new committees and new procedures in the months to come,” Heikal said.
When all regulatory formalities are completed, Citadel Capital’s paid-in capital will stand at $1.15bn, split across 1.6 billion shares, of which 1.2 billion will be common stock and a further 400 million preferred shares.
Heikalconcluded by expressing gratefulness to Citadel shareholders and limited partners for their vote of confidence in the firm, in our management team and in a strategic vision that we are confident will create value going forward.”