Dubai battles Singapore over P&O

The bidding war between Dubai and Singapore over P&O continued at full pace, following DP World's latest offer, valued at US $6.91billion.

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By  Robeel Haq Published  February 1, 2006

The multi-billion dollar bidding war between Dubai and Singapore over the British ports and ferries operator P&O continued at full pace, following DP (Dubai Ports) World's latest offer, valued at US $6.91billion. However, industry experts are predicting that Singapore’s ports company PSA will launch a minimum $7.3 billion counterbid. PSA, which is owned by state-linked Singapore investment firm Temasek Holdings, is currently planning its response to DP World’s new offer. "We don’t come with gas and oil in our pockets,” commented Singapore Prime Minister Lee Hsien Loong. “We have to make hard-headed business decisions. There’s a right price and right commitment that you must make to each project.” PSA has operations in 11 countries and is the world’s second-largest ports group. By contrast, DP World was formed as recently as September with the amalgamation of the Dubai Ports Authority and DPI Terminals. The company’s container throughput is roughly a third of what PSA handles. However, if DP World were to acquire P&O , currently the world’s fourth-largest ports group, the industry landscape would shift dramatically. Not only would DP World immediately become the second-largest player in the marketplace, it would also have secured key ports in India and Australia, where increased traffic growth is anticipated. In order to help fund the massive bid, Dubai Ports, Customs & Free Zone Corporation (PCFC) have launched the world’s largest sukuk, or Sharia-compliant bond. What was intended as a $2.8 billion issue has instead rocketed to US$3.5 billion, after an overwhelming response from investors. “The strategic fit of DP World and P&O’s global ports portfolio is compelling,” said Sultan Ahmed Bin Sulayem, chairman, DP World. “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.” P&O’s roots were established in the aftermath of the battle of Waterloo in 1815. It swiftly became the nation’s premier shipping group, earning iconic status at the height of Britain’s maritime glory years, and being incorporated by royal charter in 1840. However, it is predicted that — irrespective of who buys the company — the 165-year-old maritime legend will be broken up after its takeover. Having amassed a considerable war chest, D-Day looms large for DP World. PSA is likely to make a firm offer — or withdraw — shortly. Each has the backing of a hugely wealthy government, eager to invest abroad. Their respective nations are aiming to become global players — the burgeoning subcontinent will be their battleground.

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