Man with Midas touch in five-star shares offer

$1bn hotels group listing includes Savoy and George V, Paris

Christian Sylt
Sunday 05 February 2006 01:00 GMT

The portfolio was handpicked by Prince Alwaleed bin Talal, a Saudi Arabian worth $23bn with not one drop of his fortune coming from oil. Prince Alwaleed has the Midas touch, but it is his skill as a stockpicker that makes KHI such a hot ticket.

His diverse investment portfolio covers media, hotel, technology and banking stocks. His strategy has been to buy shares in fallen stars such as Canary Wharf, Apple and Citigroup and wait for an upturn in their fortunes.

"I am contrarian," Prince Alwaleed told The Independent on Sunday, adding: "when I went with Canary Wharf, everybody said 'no' but I got more than three times my money back."

In 1995 he bought $72m of Canary Wharf's stock as part of a consortium that pulled the company out of bankruptcy. He then sold two-thirds of his stake in 2001 for $178m, making a 47.7 per cent annualised rate of return.

But by far the most valuable holding in his portfolio is his 4.3 per cent stake in Citigroup. This is worth $10bn at the banking giant's current share price of $45.25 and was the source of Prince Alwaleed's superstar status as a bull investor.

In 1991 he invested $590m in its predecessor, Citicorp, at a time of severe strain in the US banking system. It merged with Travelers Group in 1998 to create Citigroup, the world's biggest bank, and Prince Alwaleed's investment soared almost 20 times in value.

Prince Alwaleed says Citigroup was the best business decision of his life, and it provides the greatest slice of his Kingdom Holding Company's annual dividend income, totalling over $500m. It is also responsible for much of Prince Alwaleed's impressive 30 per cent annual internal rate of return across his portfolio.

However, he admits that investing in hotels is a personal passion. His holdings in this sector are crowned by his 22 per cent stake in the Four Seasons group, one of the world's most profitable hotel companies. Lower down the luxury scale, he has a 33.3 per cent stake in the Swiss chain Mövenpick. But the most astute of his hotel investments has been the acquisition of properties in Europe.

Many Four Seasons hotels are managed by the chain but not owned by it, so the company has to pay a fee to the owner. Prince Alwaleed gets the best of both worlds, having picked his favourite hotels and got Four Seasons to run them.

London's Four Seasons on Park Lane, Geneva's oldest hotel, the Hotel des Bergues, and the George V are all in his stable.

Prince Alwaleed owns 74 per cent of KHI through a Cayman Islands-based family trust. As well as offering global depository shares in London, the company will also list in Dubai where it is based.

Perhaps surprisingly given Prince Alwaleed's wealth, KHI is being floated to raise funds for expansion in the Middle East.

"I take risks but I don't gamble. Too much risk equals gambling," he says.

So, despite his vast fortune, he often enters into partnerships to mitigate risk. Last month he set up a joint venture with the US investment firm Colony Capital to acquire for $3.9bn the Canadian chain Fairmont, which runs historic hotels including the Savoy and the glamorous Royal Pavilion in Barbados.

The deal was done to head off a hostile takeover from the billionaire investor Carl Icahn, a shareholder in Fairmont. Prince Alwaleed, who already held around 5 per cent of the company, has said: "If I invest in a company I believe in that management, I have a relationship with them."

He had previously shown his commitment in 2004 by providing funding, with Fairmont and HBOS, for a $1.5bn acquisition fund that the chain is using to expand in Europe.

But despite being careful with his cash, Prince Alwaleed has a lavish lifestyle. His home in Riyadh is a 317-room, $130m palace, and in Europe he works from his 282ft yacht, Kingdom 5-KR, moored off the French coast near Cannes.

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