Maybe because stories about dwarf-tossing at his desert encampments became public, Prince Alwaleed bin Talal, the 58-year-old Saudi Arabian financial, media, and real-estate mogul, no longer invites journalists to visit his $130 million, 460,000-square-foot Riyadh complex with 371 rooms, an 80-foot-high entrance hall, 500 televisions, and a staff of 100. The prince has traditionally been proud to show off his immense wealth, but he has also worked hard to become the Western face of Saudi finance, and slinging dwarves around like so much hash would not go down too well with a First World audience. One of the largest shareholders in Citigroup, the second-largest voting shareholder in News Corporation after the Murdoch family, and with major stakes in dozens of other Western companies, he travels the globe often wearing bespoke suits instead of the traditional Saudi thawb. Based in a country where women can’t drive or vote, he champions women’s rights and discourages his female employees, who make up 65 percent of his workforce, from wearing the veil in his offices. So it didn’t quite fit the image he was trying to convey when Business Insider broke the dwarf-throwing story in January 2012. The source was a former American employee of Alwaleed’s (who was also a friend of Alwaleed’s 35-year-old son, Khaled). The prince’s defenders hastened to put it all into context: dwarves are outcasts in Saudi Arabia; when they come begging, Alwaleed, in his great beneficence, hires them to be a roving band of court jesters, thus instilling in them “a work ethic, and you really can’t fault that.” In Saudi Arabia the wealthy think it is lucky to have dwarves around, and the dwarves enjoy it, “kind of like a circus situation.” When they are pressed into service as human projectiles, there are pillows to catch them. Pillows are obviously moot, however, when Alwaleed has the dwarves dive for $100 bills in bonfires, as the Business Insider story also alleged. Talk about occupational hazards! “It’s all lies,” Alwaleed told me emphatically during our first meeting at the Plaza hotel, in February 2012. He said the story was taken down “the next day,” although it still lives online. Even in the face of such unflattering media stories, the prince is not exactly press-shy these days, and when he wants to meet with a journalist he can commandeer the magnificent gallery inside Paris’s historic George V hotel or a large chunk of the lobby of New York’s Plaza hotel. After all, he owns the George V lock, stock, and barrel, having spent $175 million to acquire it and another $125 million to renovate it into a state of dazzling luxe perfection.
Alwaleed, it seems, loves to rescue not just dwarves but also hotels, banks, assorted companies, and even fellow moguls who have fallen on hard times. Over the last two decades, he has swooped in with tons of cash to aid various companies and superstars at their low points, including London’s Canary Wharf, Citigroup, EuroDisney, Apple, Donna Karan (the company), and Michael Jackson, to name but a few. On the day of our second meeting, in late April 2012, the prince was clutching a small string of prayer beads as he talked about News Corp. chairman Rupert Murdoch and Citigroup’s then C.E.O., Vikram Pandit. The ties between Alwaleed and Murdoch run deep. Alwaleed owns 56.2 million shares of Murdoch’s News Corporation; News Corporation, in turn, owns a 19.9 percent stake, worth around $150 million, in Rotana, Alwaleed’s privately held pan-Arab media conglomerate, based in Bahrain. As much of the world knows by now, last year was not a good year for Murdoch. Due to a phone-hacking investigation into his British newspapers, he was forced to close the major London tabloid News of the World, abandon his bid for control of the satellite network BSkyB, shunt aside his younger son and heir apparent, James, and testify before Parliament about the company’s abuses of power. Some 32 people, most of them former and current News Corp. employees, have been arrested since the phone-hacking scandal was uncovered. The scandal upset Alwaleed deeply. On Bastille Day 2011, speaking on a BBC television program, he said Rebekah Brooks, then the C.E.O. of News International (the British newspaper division of News Corporation), “has to go. You bet she has to go.” The next morning Brooks, who was subsequently arrested and charged with conspiracy to commit misconduct in public office, resigned. “I was the first one that said Rebekah had to resign,” Alwaleed told me with pleasure. But since then, Alwaleed has not called for any more heads. He remains supportive of 40-year-old James. “James is not my partner only in News Corp.,” Alwaleed said. “He’s also my partner in the Rotana. . . . He’s a highly ethical, professional, decent man. I think of his honesty. I’m thinking of him. I know him very well.” They are texting pals, and James is on his speed dial. Alwaleed believes too much has been made of the scandal—“Let’s not blow this out of proportion,” he advised me as tea was served. “Mistakes do happen. We correct them and life goes on.” He is impatient that the whole mess be resolved. “I don’t like what happened,” he admitted, “and that’s why I go to the members of the board and tell them we have to get this behind us as quickly as possible . . . I cannot tell you everything is fine. No. I want these issues behind us as fast as possible. I say the message to them confidentially, and I say it now on the record. Definitely.” He takes some satisfaction that the News Corporation stock price is up some 50 percent in the last year. “One rotten apple, a small apple, is not going to ruin the whole batch, and the shareholders in News Corp. are still accepting the situation, and they have not penalized the company at all,” he continued. Alwaleed was equally supportive, despite worse results, of Citigroup C.E.O. Vikram Pandit—all the more surprising because the prince’s stake in the company, worth around $10 billion at its peak in 2005, by last April was worth $6 billion less. When the firm’s share price was down more than 80 percent, the bank’s shareholders humiliated Pandit with a non-binding vote against a proposed $15 million 2012 pay package for him. Alwaleed voted for the package. “He deserved it,” the prince told me. “There’s a non-binding reprimand to Vikram. Clearly it was not expected, but it’s a message for him that he has to be careful and link the conversation to the performance of the share and the promise of the company. But I don’t think he was overpaid.” But the Citigroup board of directors forced Pandit to resign unceremoniously last October 15 within hours of reporting the company’s third-quarter earnings. Alwaleed, who is not on Citi’s board, seemed to have been unaware of Pandit’s firing, having just texted him congratulations about the third-quarter earnings. About his Citigroup investment, Alwaleed told me, “I don’t make mistakes. I make blunders. . . . When you make a mistake you lose $10 million, $50 million, $100 million, but when you make a mistake of $200 million to $500 million, or $1 billion, that’s a blunder. So I’ve made mistakes, blunders, but I learned from them. How? I learned from them by not doing them again.” I asked him if losing some $6 billion on his Citigroup stock was a “blunder.” “It’s not a blunder at all,” he answered. “It’s a blunder if this thing devastated me. It’s no way a blunder when we are back on track where we are right now, pre-crisis. I mean, thanks God, we survived the whole thing and now we’re doing good.” With a net worth of around $27 billion, as of today, Prince Alwaleed Bin-Talal is, according to Bloomberg’s new Billionaire Index, the 15th wealthiest person in the world, just ahead of Li Ka-Shing, the man who controls Hutchison Whampoa, an Asian conglomerate. He has been called the Saudi Warren Buffett, and like the legendary Omaha value investor he holds on to the investments he makes, some of them “for life.” “I am proud of that,” the prince says. He owns 95 percent of the publicly traded Kingdom Holding—his version of Berkshire Hathaway—with a current market value of around $20 billion, up nearly 50 percent in a year. (His investments apart from Kingdom Holding include Rotana and, by one estimate, millions of acres of land in Saudi Arabia.) He favors high-growth, high-risk technology companies, which he identifies with the help of a small Riyadh-based investment committee. (He generally shuns U.S. investment banks, with the exception of Citigroup.) He also has stakes in Apple, TimeWarner, Motorola, 360buy, Saks, AOL, eBay, and Euro Disney. Last December, he bought a $300 million stake in Twitter on the secondary market from two early investors in the company, Union Square Ventures and JPMorgan Chase. He won’t say how much of Twitter he now owns, but he indicates that the reported valuation of $10 billion isn’t far off, giving him around three percent of the company. In 2011, he joined forces with Bloomberg Television—which for a fee will provide the business news content and the operations expertise—to start a new pan-Arab TV news channel, Alarab, based in Bahrain, which will compete with Al Jazeera and Al Arabiya, which is owned by the Saudi royal family. “May the best survive,” he says. He is especially proud of his ownership of his large collection of luxury hotels. Besides the George V, he owns the Savoy, in London, and the Plaza, in New York, the last two with partners, Lloyds Bank and the Sahara Group, respectively. The Four Seasons Hotels and Resorts Company, which he owns with Bill Gates together they own 95 percent of the company and with Isadore Sharp, manages the George V and other five-star hotels around the world, including those bearing the Four Seasons brand in Beirut and Damascus. He also owns a substantial share in Fairmont Raffles Holdings International, another collection of 130 properties in 27 countries. He has been considering merging the two hotel businesses and then taking them public, but no decision has been made yet. Some knowledgeable observers have noted that, seemingly spooked by the financial crisis, Alwaleed has scaled back investing in Western companies and has turned his attention to the Middle East, especially his native country. As one of the largest landowners in Saudi Arabia, he is developing property at breakneck speed to keep up with the demand for housing as a result of the country’s increasing wealth, thanks to a crude-oil price that has remained around $90 a barrel. Kingdom Holding is building a residential development on the 4,000 acres of land outside of Riyadh, where Alwaleed’s Kingdom Tower, housing his home office, soars above everything else. In Jeddah, where he owns thousands of additional acres of land, ground has been broken on Kingdom City, a $20 billion city within a city that will boast a tower of 1,000 meters, the tallest building in the world. “Number one is nice, yes,” Alwaleed says. “I have to be honest with you. Number one is beautiful.” Alwaleed is a zealot about the accuracy with which his wealth is portrayed. He told me Bloomberg had the correct number a year ago—at $21 billion—while the latest Forbes list of the world’s wealthiest people has it wrong—at $18 billion. “Forbes made the blunder,” he told me. “We told them that they made a mistake, and they have to correct it, and I’ll go public with you on that. They better correct it. They better correct it.” Since then Bloomberg has moved his wealth up to $27 billion. Just prior to the release of the 2013 Forbes list, Alwaleed insisted, according to the magazine, that his wealth was $29.6 billion. When Forbes did not go along with Alwaleed’s valuation, Alwaleed issued a press release and sent a letter to Steve Forbes, the Forbes chairman—picked up in the financial press worldwide—that he had “severed ties” with the Forbes Billionaires List and would henceforth work solely with Bloomberg when it comes to assessing his wealth. “Over the past six years, Kingdom Holding Company officials, working with the Forbes teams, have uncovered what appear to be intentional biases and inconsistencies in the Forbes valuation process including, especially this year,” according to the Kingdom Holding press release. (Alwaleed remains on the Forbes list, at No. 26, with a fortune the magazine estimated at $20 billion.) Regardless of the dispute over $9.6 billion, Alwaleed is not shy about ostentatious displays of his wealth. “What I say is, ‘I live happily,’” he told one interviewer. At his palace fresh flowers are flown in every week from Holland. Guest bathrooms have gold fixtures. The recreation room, described as “cavernous,” contains a swimming pool and dozens of stuffed hunting trophies. Kingdom Resort, built on 250 acres just outside of Riyadh, is said to be his “country resort.” It boasts a private zoo and an underground cavern. Despite the isolation, Alwaleed is never far from a television, cell-phone coverage, and Internet access. He likes to say he makes his most important personal and business decisions in the desert. As with everything else in his life, when it comes to dining habits, Alwaleed is fastidious. At every meal, his chefs prepare vast banquets of many different culinary treats, including roasted camel. But Alwaleed does not eat meat and eats very sparsely—no more than 1,100 calories a day—in an obsessive but largely unsuccessful effort to keep his weight at 140 pounds. His food is kept in separate refrigerators, with calorie counts marked. (He was a chubby child and during his college years in California he weighed as much as 200 pounds.) He likes to boast that he can still fit into pants he has owned for 30 years. He often goes on long marches in the Saudi desert or in the cities he visits. His security detail is used to him getting on his bicycle late at night and riding around Riyadh, while talking on his cell phone or texting with world leaders. “Hello Carla,” he texted the French president’s wife after her husband Nicolas Sarkozy’s election defeat on the night of May 6. “I don’t wish to disturb my friend Nicolas but please do convey my respects to President Sarkozy as he just gave a high class and honorable concession speech. The friendship between me and him is stronger than ever!” Responded Bruni: “Thank you, your highness. My husband thanks you for all the support. Looking forward to seeing you soon.” Then there are his toys with powerful engines. His fleet of cars is said to number more than 300, and it includes Rolls Royces, Porsches, and Lamborghinis. For security reasons, many of the cars are carbon copies of one another so when he travels around town, one car can be a decoy. His 280-foot yacht, Kingdom 5KR, is moored in Cannes and was once owned by Donald Trump, and originally built for Adnan Khashoggi, the Saudi arms dealer. He also has a fleet of jets, including a private Boeing 747—outfitted with items you’d expect at a five-star hotel, as well as a gold throne—and a Hawker Siddeley 125, which the first Saudi woman pilot has been trained to fly. He says he is the only private citizen with his own 747 and knows that the Google founders, Sergey Brin and Larry Page, do not have one. “They have a 787,” he says definitively. (Brin and Page actually own a customized 767-200.) Alwaleed took delivery last December of an Airbus A380—the largest commercial aircraft currently available. “I feel good because, really, frankly speaking, I bought it at a very competitive price,” he says. “How much did you pay for it?” I ask, figuring that a new A380 costs more than $300 million. “A very competitive price,” he responds. “I can’t tell you. A very competitive price. An extremely competitive price.” He is the only private citizen to have ordered one. But this past February after completely refurbishing the jet he sold it, Bloomberg reported. Alwaleed is a nephew of King Abdullah, the current Saudi leader, and a grandson of King Abdul-Aziz, the first Saudi king—and therefore part of the family that controls the country’s 267 billion barrels of oil. Many Saudis assume that his fortune derives from oil, too. Or that his father gave him a billion riyals (around $270 million) to get him started. Or that he is, as The Economist argued in 1999, a front man for the vast wealth of the Saudi royal family, which prefers to hide behind the limelight-loving Alwaleed. In any event, the conventional wisdom goes, his vast fortune can’t possibly be one he built himself. “He wants to be thought of as a self-made man, and he can’t,” Fouad Ajami, a senior fellow at the Hoover Institution, once said. “This is the one wish he shall never have.” Alwaleed’s mother, Mona El-Solh, is from Lebanon, where her father, Riad El-Solh, was the first prime minister after the country was granted independence from France, in 1943. He served a second term as prime minister between December 1946 and February 1951. Soon thereafter, during a visit to Amman, Jordan, he was assassinated. As a young man, Alwaleed’s father, Talal bin Abdul-Aziz, had a falling out with the royal family in the early 1960s when, as a cabinet minister, he publicly called for constitutional reform and a more democratic society. In August 1962, while in Beirut, he openly criticized the Saudi regime, and in retaliation the Saudi authorities confiscated his property and his Saudi passport, and some of his supporters were arrested. He lived in exile for a time in Cairo, where he started the Free Princes Movement, an organization that pushed for democracy in Saudi Arabia, in part by using samizdat radio broadcasts. Eventually, he reconciled with the royal family but his rebelliousness took him off the succession path. Alwaleed’s parents separated in 1962 and divorced in 1968. As a boy Alwaleed split his time between Beirut and Riyadh. In January 1975, while at the prestigious International School of Choueifat, in Beirut, he was caught looking at another student’s test paper and when confronted about it, he berated the teacher. He was expelled and completed his high-school studies with tutors. Like some other members of the Saudi royal family, Alwaleed enrolled in Menlo College, in Atherton, California, and in 1979 he graduated with a degree in business administration. He completed his formal education, through an off-campus program, in 1985, with a master’s degree in social science from Syracuse University. “He is one of the most driven people I have ever met,” says Michael Barkun, a former professor of Alwaleed’s. “He is a person of extraordinary intensity.” The official story of how Alwaleed got his start in business is where, many people believe, the myths about him originate. Alwaleed claims his father gave him $30,000. Within a year, he had lost the money. He went back to his father, who gave him $300,000. This time, it took him three years to lose it. He went back to his father again, who refused to give him more money and instead gave him the deed to a house he was building for Alwaleed in Riyadh. “Go work for yourself,” his father admonished. Alwaleed got a $600,000 mortgage on the house from a branch of Citibank in Riyadh. In pictures, the house looks like little more than a ramshackle structure and certainly not one that would serve as collateral for a large mortgage. To raise additional money, Alwaleed says, he sold a $200,000 necklace that his father had given his first wife, Dalal bint Saud, a daughter of King Saud. “She sold it for me and no one knows about this,” he says. As a grandson of the king, he also received a monthly stipend of $15,000. In any event, his first business break came from managing the construction of a sports and social club that a South Korean company was building in Riyadh. Soon, he was overseeing the construction of a variety of projects. (Saudi law used to require foreign businesses to be partnered with Saudis to develop projects in the country.) He also owned a travel agency. Then, he began to buy small companies in Saudi Arabia through what he calls “hostile takeovers,” one of which was a bank, United Saudi Commercial Bank. By 1988 Forbes was estimating his wealth at $1 billion, but he was virtually unknown outside Saudi Arabia. All that changed on February 22, 1991, when The New York Times ran a front-page article about how Alwaleed had come to the rescue of Citicorp (the successor to Citibank) by investing $590 million in a preferred-stock issue at a time when the bank was reeling from a series of bad commercial real-estate loans and looking to raise new capital, at the insistence of the Federal Reserve, to shore up its wobbly balance sheet. Throughout the fall of 1990, Alwaleed had been quietly buying Citicorp stock in the open market, spending $207 million on about 16 million shares—just below the 5 percent threshold that would have required him to disclose the stake publicly—and making him the largest single shareholder in the company. As a result of this investment, Citicorp management asked if he wanted to participate in a private placement of preferred stock, paying an 11 percent dividend. He agreed. His new $590 million preferred-stock stake was convertible into an additional 37 million Citibank shares, giving him a 14.9 percent stake. (When after a lengthy wait, the Federal Reserve did not approve Alwaleed’s application to own that much Citicorp stock he was forced to reduce his stake to 10 percent, an ownership position that did not require Fed approval.) In 1999 The Economist crunched the numbers and claimed they didn’t add up. As for Alwaleed’s original seed money, “you could barely clothe a Saudi prince for such sums, let alone furnish him with a multi-million-dollar empire.” Furthermore, “he has not earned enough from his investments to pay for all he has spent in the 1990s.” And finally, “Either the prince has a valuable and unrevealed source of income, or his income is much less than [he claims]. . . . Anyone who seeks to present Prince Alwaleed as the face of the new Saudi Arabia needs to explain the mystery that lies at the heart of his empire.” (Needless to say, Forbes also has its doubts about the size of Alwaleed’s fortune.) Alwaleed is miffed that people don’t believe him about the origins of his vast wealth. When I pointed out that even many people in Saudi Arabia doubt his self-creation myth, he retorted, “That’s their problem. There’s no myth.” He insists that his wealth is self-made. “If I had access to oil, why would I borrow $30,000 from my father, or from Citigroup?” he asked me, incredulously. “I’d just begin from the beginning with $10 million. Why would I do that? Why would I do it twice and go bankrupt? And, by the way, strange enough, the first loan I got from Citigroup, I still have the loan paper. . . . If I was born with a silver spoon in my mouth, why would I have a tin spoon in my mouth?” In March 1999, he wrote to The Economist about its takedown: “You seem to imply there is something shady in the way my assets have grown. I have never received a single parcel of land from my government, nor have I ever made or received improper payments. The truth is more prosaic. My fortune is due to my belief in God and, quite simply, to my advisers who ‘work smart, not hard,’ as I like to put it.” In 2013, Shadi Sanbar, Kingdom Holding’s C.F.O., wrote in a letter to Forbes that the magazine’s undervaluation of Alwaleed’s fortune “strikes in the face of improving Saudi-American bilateral relations and co-operation. Forbes is putting down the Kingdom of Saudi Arabia and that is a slap in the face of modernity and progress.” To me, in Paris, he says, “I’m transparent. I have nothing to hide, a good story to have. You know, there is a lot of weirdness and vagueness about what Saudi investors do, and I like to keep everything open because I have a good story to tell. And I have a responsibility. I’m the only [Saudi] man on the list of Forbes and Bloomberg, so it’s good to open up and show that Saudi businessmen, Arab businessmen, Muslim businessmen, can do what Westerners do.”
Subscribe to MENA OPPORTUNITIES for more...
