Moving onto the frontline

One firm wants to be first into Iraq to gain an advantage over more cautious rivals

Cairo-based private equity firm Citadel Capital, which expects to close its first institutional fund on $500 million this year, is planning a push into Iraq's oil and gas sector before multinational oil companies gain further ground. The firm needs to move into the war-torn country's oil and gas sector before the likes of ExxonMobil and Shell gain traction, according to Ahmed Heikal, chairman and founder of Citadel Capital.

“We need to be there and we need to be there right now,” Heikal said at PEI Media's Emerging Markets Private Equity Forum in New York. He added that opportunities will be best while the country is still stabilising and many companies are concerned about the security situation.

“They're rebuilding, and [Iraq] will be stable in five, six, seven or eight years,” Heikal said. The firm already has energy platforms with operations in Egypt and Pakistan called National Petroleum Company and NOPC/Rally Energy Corporation.

Citadel has established a foothold in Iraq through a cement platform it has developed called ASEC Cement. The firm bought an 85 percent stake in Iraq's GRD Cement in 2007 as an add-on to its platform and is now focused on completing more add-ons. “Given the right opportunities, we will look in the country,” Heikal said.

The virgin territory of war-torn Iraq is beginning to pique the interest of investors as other markets suffer from the effects of the global credit crunch. One firm, London-headquartered investment banking group Fairfax is raising up to $1 billion for a fund aimed at the Iraqi industrial, agriculture and communications sectors, according to a report in The Wall Street Journal.

Fairfax managing director Richard Blakesley said his firm had identified 44 projects requiring some $4.5 billion in investment, including a $720 million recycling plant and an $11 million chicken slaughterhouse. “There is plenty of money left in the Gulf, and what's more risky now – investing in real estate in Dubai or investing in industrial development in Iraq?” Blakesley was reported to have said.

Other private equity investors eying Iraq include Templeton Emerging Markets Equity Group, an arm of listed investment firm Franklin Templeton Investments, and Dubai-based private equity firm Scimitar Global Ventures.

Dubai-based private equity firm Levant Capital has taken a minority stake in US power generation services firm APR Energy (APR). The $30 million investment, made from the $100 million MENA Transformation Fund I, will allow APR to expand its operations in the Gulf region and North Africa, said APR chief executive John Campion. Levant, founded by Saudi Prince Khaled bin Alwaleed bin Talal Alsaud, is currently looking at deals in the equipment rental, healthcare and education sectors, according to executive director Philippe Audi.

A consortium led by Bahrain-based listed private equity firm Investcorp has acquired a 70 percent stake in L'Azurde, a Saudi Arabian jewellery company advertised by Lebanese pop singer Elissa. Investcorp will take a 51 percent stake in L'Azurde, a business valued at around $300 million, while Eastgate Capital Group, a subsidiary of NCB Capital and Abu Dhabi investment banking group The National Investor, will take a combined 19 percent stake.

Kuwait Projects Company (KIPCO), an investment group with around $18 billion in assets under management, expects to launch a Middle East and North Africa-focused private equity fund. It will be the company's maiden private equity venture and will invest in sectors including financial services, real estate, retail and industrial. No target size for the fund has been revealed, but it will be “sizeable”, said a spokesman for the firm. Fundraising is expected to begin towards the end of 2009.

NBD Sana Capital, the private equity arm of the National Bank of Dubai, will reportedly set up a $200 million fund to invest in Pakistan's distressed industrial units and farming projects. The fund will inject capital into distressed projects primarily in the textile, agricultural and dairy farming sectors, Mirza Ikhtiar Baig, chairman of the Pakistan-UAE business council, told UAE daily newspaper the Kaleej Times. It will also invest in some textile companies to boost their production capacities.

Cairo-headquartered Citadel Capital and Sphinx Private Equity Management, a subsidiary of Citadel, have held a first close on $51.5 million of the Sphinx Turnaround Fund. Anchor investors in the fund include the European Investment Bank and the International Finance Corporation, the World Bank's private investment wing, which are investing $17 million each. Citadel is sponsoring the fund with $10 million while Geneva-based Swiss Investment Fund for Emerging Markets is finalising a commitment of $7.5 million.

Aureos Capital, the emerging markets-focused private equity firm, has established an office in Morocco, its first in North Africa. The Casablanca office is being led by Isabelle Portebois-Benjelloun, former head of private equity at independent Moroccan investment bank CFG Group. Aureos, which already manages $140 million across its three regional Sub-Saharan African funds, is raising a pan-Africa vehicle, for which it has currently garnered $253.5 million on its way to a $400 million target.