Firm gets free Citi shares from Alwaleed RIYADH - The Capital Market Authority has approved the request of Kingdom Holding Company (KHC) to reduce its capital from SR63 billion to SR37.06 billion. The cut effectively reduced the number of shares from 6,300,000,000 shares to 3,705,882,300 shares. The company said on Tadawul website on Tuesday that the 41.2 percent capital cutwas done after Prince Alwaleed Bin Talal, the firm's main shareholder, had given its Citigroup shares worth $597.3 million. Earlier in the day, Kingdom Holding said it had received 180 million free Citigroup shares from Alwaleed, which owns 95 percent of the company. “Prince Alwaleed's initiative and the (capital reduction) decision ... will lead the company to profitability and enable it to distribute dividends ... once the board of directors approves it,” the company said in an emailed statement. “(Kingdom) ... received a free-of-charge donation from Prince Alwaleed in the form of 180 million shares in Citigroup of which the value stands at SR2.24 billion ($597.3 million) as of end-2009.” Kingdom Holding gets most of its revenue from dividends from its shareholdings, and from its hotel business. The firm, whose stock has lost more than half its value since listing on the Saudi bourse in 2007, had losses of 65 percent of its capital at the end of the third quarter, and losses of more than 75 percent would require a suspension in its stock. The Capital Market Authority said on Tuesday it had approved a request by the company to reduce its capital to SR37.06 billion from SR63 billion pending shareholders' approval. Hesham Abu-Jamea, head of asset management at Bakheet Investment Group, said the amount of the capital decrease would go towards covering accumulated losses. Turmoil in the global market has slashed the value of the firm's assets, and shareholders that bought into the company's $860 million initial public offering (IPO) have received no dividends. Several analysts, who did not want to be identified, criticized the company for not announcing previously that it had a capital reduction plan. Under Saudi bourse rules, a company must announce to the market when it has made a request to the bourse watchdog for approval of plans to make changes to its capital. Other analysts saw in the plan a means for the company to boost its book value ratio and reduce the percentage of losses. “They (Kingdom) had to deal with the sharp decline in the stock's book value to avoid deepening the crisis,” said Bakheet's Abu-Jamea. Alwaleed's spokesperson declined immediate comment and said in a written response to emails from Reuters that a news conference would be held next week. Analysts said the timing of the capital reduction plan, a few days before the announcement of fourth-quarter earnings, could indicate that the firm expects results to be worse than its $8.26 billion loss in the same period in 2008. Kingdom's Citigroup stake accounted for more than 40 percent of its assets when it went public. It posted a near 77 percent drop in nine-month net profit due mainly to lower dividend income and the impact of the global slowdown on its hotel business.
