DP World to sail away with P&O

DP World has made a US $5.7 billion offer to buy shipping group, P&O. The takeover would turn the Dubai government-owned company into the world’s third largest port operator.

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By  Robeel Haq Published  December 1, 2005

DP World has made a US $5.7 billion offer to buy the global shipping group, P&O. The takeover, which has already been approved by P&O’s board, would turn the Dubai government-owned company into the world’s third largest port operator. Officially founded in 1837, Peninsular & Oriental Steam Navigation Company operates in 100 ports in 18 countries, and has 29 container terminals and logistics operations. The company has been the subject of bid speculation following a series of sell-offs in recent years, but it is still a sizeable player in the shipping sector. “P&O has contributed a lot to the maritime industry for the whole world and definitely for the UK,” commented Sultan Ahmed Bin Sulayem, chairman, DP World. “DP World’s acquisition of P&O will create a top three global ports operator with the scale and network to service an increasingly global and consolidating customer base,” he added. DP World already operates a number of ports around the world including, Dubai and Abu Dhabi, as well as in Saudi Arabia, India, Germany and Australia. It also has operations in terminals in Hong Kong and China, which it has targeted for future growth. It recently signed an agreement to develop a port at a Greenfield site in Qingdao, for instance, but the P&O takeover will give it a much greater foothold in this market. P&O’s Asian ports, including Qingdao in China and Chennai in India, now generate more than half of the volumes of containers unloaded at its ports. The company also has a number of ports in Western markets as well. “The strategic fit of the two companies’ global ports portfolios is particularly compelling,” said Sulayem.“We are strong in many parts of the world. However, we are not so strong in areas such as America, Australia and Europe. P&O already has a good reputation in those markets.” DP World, currently considered the seventh biggest port operator in the world, offered an all-cash bid for P&O, worth around $7.60 a share. This represents a 46% premium to the closing price on the 27th October, which was the last trading day prior to market speculation. “The amount being offered by DP World is appropriate,” said Neil Davidson, container ports analyst at Drewry Shipping Consultants. “The acquisition makes sense on a business level too because DP World and P&O compliment each other, avoiding any possible overlaps in business. This helps to ensure both sides can integrate without cutting across each other.” It is essential, according to Davidson, that DP World carefully works with the management of P&O, who will all remain in place, to plan a successful integration strategy. This should be designed on a long-term basis to prevent any rushed decisions. “In the short term, P&O should continue business as normal,” continued Davidson. “Of course, in the long run, DP World will inevitably want to introduce its own strategy, although this is likely to happen several years down the line.”

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