Dubai Ports sparks P&O bid war

The Port of Singapore and AP Moller-Maersk were tipped last week to launch a counter-bid for P&O, after shares in the ports group raced ahead by 30% following a takeover approach from Dubai Ports World (DPW).

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By  Angela Jameson Published  November 6, 2005

The Port of Singapore and AP Moller-Maersk were tipped last week to launch a counter-bid for P&O, after shares in the ports group raced ahead by 30% following a takeover approach from Dubai Ports World (DPW). The two ports groups were frontrunners to enter the race for P&O, analysts said last week, predicting that a bidding war for the Asian-focused ports company could value it at up to US$6.5 billion P&O’s shares rose close to US$10 the day after news of the bid leaked, their highest in more than five years. The target company said nothing officially, but it is understood that an approach from DPW was made at the end of last week and talks between it and the 165-year-old company are at a very early stage. P&O is the fourth-largest global container port operator in the world and “importantly, the only significant one to be institutionally controlled, making it a unique set of assets”, analysts at DresdnerKleinwortWasserstein noted. Soaring world trade, especially between China and the West, has revived the fortunes of ports companies. P&O has more than half of its assets in Asia and could increase its capacity from 15 million TEU (twenty feet equivalent units) to 33 million TEU in the next few years, including a massive new port on the Thames River, London Gateway, in the United Kingdom. As Arabian Business went to press, observers pointed to the track record of Sir John Parker, P&O’s chairman, in achieving substantial bid premiums for companies that he controls. The chairman, who oversaw the merger of National Grid and Lattice Group to form National Grid Transco, extracted a 105% premium for P&O Princess when it was bought by Carnival Cruises. He steered through a 46% premium for RMC, bought by Cemex, the Mexican cement group, last year. At P&O he sold the company’s 25% stake in P&O Nedlloyd to AP Moller-Maersk for a 40% premium. It is thought that Sir John will be able to repeat these successes at P&O, where any deal is likely to have to be recommended because of the complexity of the business and due to change-of-control clauses in some of the contracts. DPW, which paid 15 times earnings for CSX Terminals, a ports business in Hong Kong, in December 2004, is thought to have ambitions as an industry consolidator. A multiple of 15 times earnings would give P&O an enterprise value of over US$8 billion. DPW’s approach for the ports group could also trigger interest from financial buyers. Hutchison Whampoa, the world’s biggest ports group, is thought to be ruled out from bidding for P&O because of competition restrictions. The Hong Kong-owned Hutchison already owns Felixstowe container terminal, giving it 52% of the UK market. A spokesman for Maersk declined to comment on whether it was looking at a counter-bid. Temasek, the investment arm of the Port of Singapore, and Hutchison also declined to comment. In a separate move, DailmerChrysler’s diesel engine unit may be sold to a consortium led by Dubai International Capital (DIC) and Kohlberg Kravis Roberts. According to German newspaper reports, DIC — a unit of Dubai Holding — is part of a US$2 billion offer. The unit, MTU Friedrichshafen, specialises in diesel engine for ships and locomotives, and last year achieved sales of nearly US$2 billion. It has over 6500 employees.

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