Nov. 7 (Bloomberg) -- Saudi Prince Alwaleed bin Talal, who has made billions of dollars by investing in underperforming, brand-name companies, says he's bullish on two of the biggest: Citigroup Inc. and Time Warner Inc.

Alwaleed, 50, Citigroup's biggest shareholder, said the bank's shares may rise more than 50 percent to $70 a share in the next year as the company puts a series of scandals behind it and investors focus on earnings growth. Time Warner shares will advance on the strength of its Internet unit, America Online, he said yesterday in an interview at the Hotel George V in Paris.

Alwaleed backed Citigroup and Chief Executive Officer Charles Prince even though the prince has forged ties with Deutsche Bank AG and HSBC Holdings Plc. He met with Citigroup Chairman Sandy Weill and Mike Jensen, his private banker at Citigroup, on Sunday at the George V. Citigroup shares have fallen 5.4 percent this year.

``Chuck Prince is trying to put everything in place, and really the expectation for Citigroup is to go back sky high,'' Alwaleed, dressed in a gray turtleneck and gray checked jacket, said in front of an 18th century tapestry at the George V, which he owns. ``He's doing a good job.''

Alwaleed, a nephew of Saudi King Abdullah, owns 4.3 percent of New York-based Citigroup, valued at $9.9 billion. He holds 1 percent of Time Warner, also based in New York, valued at $821 million.

With shares of Time Warner down 9.5 percent this year, billionaire Carl Icahn is pressuring the company to buy back shares, name new board members and sell part of AOL. The stock traded for $17.61 on Nov. 4 in New York. Icahn and a group of investors owned 2.8 percent of Time Warner as of last month.

AOL Is `Jewel'

Alwaleed also met with Time Warner CEO Richard Parsons at the George V, which served as U.S. General Dwight Eisenhower's headquarters in Paris during World War II.

``Time Warner now is witnessing a potential revival,'' said Alwaleed, who was accompanied by his spokeswoman, travel coordinator, two photographers and a cameraman. ``When I met Mr. Parsons a year ago, I told him AOL was a jewel. It's a jewel, but not many people are seeing it. AOL should never be sold in totality. This is the locomotive, the engine of Time Warner.''

Alwaleed this year established ventures with Deutsche Bank, Germany's biggest lender, to provide banking and brokerage services in Saudi Arabia and with HSBC, Europe's No. 1 bank by market value, to invest in sub-Saharan Africa. Citigroup sold its 20 percent stake in Riyadh-based Samba Financial Group, formerly known as Saudi American Bank, to the state-run Public Investment Fund in 2004. Alwaleed owns 5 percent of Samba.

Any split between Alwaleed and Citigroup would mark a turning point in a 25-year relationship during which the bank and the billionaire have credited each other for their successes. Alwaleed said he is simply pursuing lucrative investments.

Alwaleed's Strategy

``I go where my interests are,'' he said. ``There's no doubt that HSBC helps us a lot in the African continent and Deutsche Bank will help us a lot in Saudi Arabia and the Gulf region. But this will never ever take away from my international alliance and global link with Citigroup.''

Citigroup CEO Prince, 55, said Alwaleed remains a supportive shareholder.

``He's got a lot of investment activities, and it would be very unusual, I think, if those were exclusively with us,'' Prince said in a Nov. 3 interview. ``I don't take anything from the notion that he's working with other institutions.''

Alwaleed has pursued a strategy of buying battered shares of Western companies with established brand names, which led him to acquire holdings in Apple Computer Inc. and Motorola Inc. in the 1990s. He has begun to focus on emerging markets and hotels, this year buying a stake in London's Savoy Hotel and announcing plans to build a Four Seasons resort in Marrakech, Morocco.

`Millennium Bug'

The prince made his last big bet on Western companies in 2000 as the Internet bubble began to deflate. That year Alwaleed invested $2 billion in 19 U.S. stocks, including $50 million each in Internet companies Amazon.com Inc., DoubleClick Inc. and Priceline.com Inc. He also put $200 million into WorldCom Inc., which went bankrupt in 2002.

Alwaleed called the investments his ``Millennium Bug'' in his authorized biography, ``Alwaleed: Businessman, Billionaire, Prince,'' written by former Cable News Network host Riz Khan and published last month by William Morrow.

In the interview, Alwaleed said he doesn't expect shares of Cupertino, California-based Apple to rise much further. The stock gained fivefold to $61.15 over the past two years, after CEO Steve Jobs introduced the iPod music player. Alwaleed owns 3 percent of Apple, a stake valued at $1.5 billion.

``The benefits of the iPod and all the good moves that Steve Jobs has made have already been put in the price,'' he said.

Defending News Corp.

Alwaleed also reiterated plans to increase his stake in News Corp. if it's necessary to prevent John Malone's Liberty Media Corp. from taking control of the New York-based company. The prince owns 5.46 percent of News Corp., which is controlled by Chairman Rupert Murdoch, 74, and his family. Alwaleed's stake is valued at almost $2.6 billion.

``We'll spend whatever is needed to keep this company independent,'' he said. ``I am not anti-Malone. I am pro-Murdoch and pro-News Corp.''

Alwaleed began investing after graduating from California's Menlo College in 1979, and a year later he received a $300,000 loan from Saudi American Bank, which was run by Citicorp, according to the biography. By 1989 he was worth $1.4 billion, partly because of commissions earned as a representative of international construction companies in Saudi Arabia.

Citigroup Links

The prince returned Citicorp's confidence in 1991, investing $590 million in the bank, which needed cash as it struggled with Latin American loan losses and a collapse in U.S. real-estate prices. Alwaleed, who already owned $207 million of Citicorp stock, later had to cut his stake to comply with a ruling by the U.S. Federal Reserve.

He became one of the world's richest people as the shares climbed 20-fold over the next decade. In recent years, the relationship has hurt Alwaleed's fortune.

Citigroup shares have dropped 3 percent to $45.60 since Prince became CEO on Oct. 1, 2003. Frankfurt-based Deutsche Bank's stock has gained 49 percent to 79.65 euros in the same period. Shares of London-based HSBC are up 11 percent to 900 pence.

Citigroup's Saudi pullout and Alwaleed's ventures with other banks coincided with a chill in relations between the U.S. and Saudi Arabia after the Sept. 11 attacks in New York and Washington, in which 15 of the 19 hijackers were Saudi nationals.

Giuliani Snub

Former New York Mayor Rudolph Giuliani on Oct. 11, 2001, rejected a $10 million check from Alwaleed for a World Trade Center relief fund after the prince said the U.S. needed to do more to resolve the Israeli-Palestinian conflict.

Alwaleed has berated U.S. financial companies for a lack of enthusiasm for doing business in Saudi Arabia.

``American companies, and banks more specifically, have to be more aggressive in looking at our region in a more receptive manner,'' Alwaleed said yesterday.

Deutsche Bank said April 12 that Alwaleed agreed to establish a joint venture to provide equities brokerage and other investment banking services in Saudi Arabia.

In July, HSBC said it had established a 50-50 joint venture with Alwaleed to take advantage of growing investment opportunities in sub-Saharan Africa. HSBC and Alwaleed will each invest as much as $200 million in African businesses, HSBC said.

Expanding Empire

It's natural that Alwaleed would want to expand his banking and investing relationships beyond Citigroup, said Richard Bove, an analyst at Punk Ziegel & Co. in Pinellas Park, Florida, who rates Citigroup's stock a ``buy.''

``It's no different than a consumer having six credit cards in his pocket,'' Bove said. ``I wouldn't think that he's discouraged with Citigroup or offended by them.''

Citigroup, which had been in Saudi Arabia since 1955, sold its stake in Samba because it didn't want to be a minority shareholder, Prince said. The company also decided not to renew the contract under which its executives managed Samba.

``In that institution, we were limited at a small stake,'' Prince said. ``It doesn't in any way reflect our interest or involvement in that region. We have operations in almost all the Middle Eastern countries, and it's an area we think has great growth potential.''

Citigroup's exit came as the Saudi economy boomed.

The kingdom, the world's largest oil producer, will sell a record $163 billion of oil this year after oil prices rose to more than $60 a barrel, Samba said in an Oct. 23 report. That's 54 percent more than 2004's record $106 billion, Samba said.

In addition to pulling out of Saudi Arabia, Citigroup closed its branch in Oman in 2004.

Alwaleed, Weill

Prince replaced Weill as CEO. Weill, 72, wanted to leave the company and start an investment fund with Alwaleed, the Wall Street Journal reported on July 21. Alwaleed said he hasn't seen such a proposal but would consider it.

``Whatever Sandy gives me, I will look at it very seriously,'' he said.

After yesterday's meeting, Weill declined to comment on whether the two men discussed starting an investment fund.

``We talked about how to make the world a better place,'' he said.

Prince is struggling to revive Citigroup's stock price, which is headed for a fourth annual drop in five years. In a bid to accelerate profit growth, Prince sold the company's life- insurance and asset-management units, and split the consumer bank into North American and international divisions. He also consolidated power within the executive offices by making all Citigroup's business heads report to him.

Citigroup Scandals

Prince pledged in October 2004 to restore Citigroup's reputation among clients and investors after the company endured a bond-trading scandal in Europe, the forced closure of its private bank in Japan and allegations it helped businesses such as WorldCom defraud investors.

Prince has settled lawsuits and regulatory inquiries that dogged the company for three years.

Citigroup, created in the 1998 merger of Travelers Group Inc. and Citicorp, has 300,000 employees, $1.47 trillion in assets and operations in more than 100 countries.

``Citigroup for the last three years has stagnated from a price point of view; clearly there were so many clouds over what was going on at Citigroup,'' Alwaleed said. ``The performance of the company itself is incredible.''

To contact the reporter on this story: James Cordahi in Paris on cherifcord@bloomberg.net Brian Sullivan in Paris on bsullivan@bloomberg.net Vernon Silver in Rome vtsilver@bloomberg.net

Last Updated: November 6, 2005 19:17 EST