UPDATE 2-Egypt's Citadel Capital plans $528 million capital hike

Sun Sep 15, 2013 3:54pm BST

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* One of biggest capital-raisings since 2011 revolution

* Plan stalled under Mursi government

* Share sale would help loss-making firm alter structure

* Executive says has commitments to buy 85 pct of shares

* Non-core investments to be sold off gradually (Adds executive's comments, details of strategy)

By Andrew Torchia

DUBAI, Sept 15 (Reuters) - Egyptian private equity firm Citadel Capital has won clearance to ask shareholders to approve a capital increase, it said on Sunday, a sign of increasing confidence in the country's financial markets.

If the 3.64 billion Egyptian pound ($528 million) share issue goes ahead, it will be one of the biggest capital-raisings in Egypt since its 2011 revolution.

Citadel, which has struggled with losses over the past two years, originally requested regulatory approval for the share sale last year.

But like many business plans during the administration of Islamist President Mohamed Mursi, the sale did not go ahead because of bureaucratic obstacles and poor market conditions. Mursi was ousted by the army after popular protests in early July.

The new military-backed government, which aims to rule until elections and a return to democracy next year, has pledged to run the economy more efficiently. The stock market is up more than 15 percent since Mursi's ouster.

Under Mursi, "there was complete paralysis, no opportunities, no approvals. It was a very difficult environment to do business, even for plain-vanilla transactions," Hisham El-Khazindar, co-founder and managing director of Citadel, told Reuters by telephone.

"Now you start to see some movement ... Egypt is open for business again."

The company will hold a shareholders' meeting to propose issuing 182.1 million preferred shares and 546.3 million common shares at a par value of 5.0 Egyptian pounds, raising its total number of shares to 1.6 billion and paid-in capital to 8 billion pounds.

The money raised would be used to boost Citadel's ownership to between 51 and 100 percent in most of the major companies in which it invests, particularly in the energy, transport, agriculture, mining and cement sectors, it said.

Other investors and partners in these firms would be offered a chance to become shareholders in Citadel. Meanwhile, Citadel would gradually sell off its non-core investments over a period of at least three years, as part of a plan to transform itself from a private equity firm to an investment holding structure.

COMMITTED

Citadel, which says it controls investments worth $9.5 billion, posted a group net loss of 702.4 million Egyptian pounds in 2012, after a loss of 800.5 million pounds in 2011.

Khazindar said the company believed it could already count on commitments from potential investors to buy about 85 percent of the planned 3.64 billion pound share issue.

Most of Citadel's investments are focused on Egypt and Africa. Khazindar conceded that the outlook for Egypt's economy was challenging, but said Citadel saw potential in its portfolio of energy firms and companies making products which Egypt currently imports in large volumes.

Citadel's shares fell 1.5 percent to 3.22 Egyptian pounds on Sunday as some investors reacted to the potential dilution caused by the share offer; the stock is down 15 percent since the end of last year. The overall stock market rose 0.5 percent. (Additional reporting by Mirna Sleiman; Editing by Ruth Pitchford)

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