Bidding war cruises into stratosphere

UAE ports giant’s latest bid considered overpriced, according to market experts

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By  James Bennett Published  February 16, 2006

The bidding war between Dubai Ports World (DPW) and PSA International, a Singapore government investment agency, over P&O is overpriced, according to a major investment brokerage firm. Following DPW’s increased 520p (US$9.20) a share offer last week, Bear Stearns, an investment banking, securities trading and brokerage firm, said in a statement that the bidding war was “cruising further into the stratosphere”. Six months ago the UK stock market predicted P&O would be sold for 500p confirming what many experts had feared – that the stream of bids were continually overpriced. The Bear Stearns statement added that another bidding round was “possible” and that DPW had more chance of victory as it could be “slightly hungrier” to win P&O given its “smaller relative market size and drive to diversify away from its home operations”. If DPW is successful it would create the world’s third-largest ports group, while victory for PSA would create the world’s leading ports business, leapfrogging Hong Kong’s Hutchison Whampoa. The 520p per share offer was 10.6% over the offer made by PSA valuing the group at around £3.9 billion (US$6.5 billion). At the end of last month Dubai Ports Customs and Free Zone Corporation (PCFC), the holding company of DPW, had priced the biggest Islamic bond in history worth US$3.5 billion despite temporarily losing out to a previous takeover bid by PSA International for P&O. The sukuk listing was raised to add to its war chest in its efforts to takeover the 165-year old P&O, one of the UK’s oldest companies. The long-running sea battle for P&O has run since November last year. Ironically, the previous £3.5 billion bid ($6.3 billion) from Singapore, was the exact price that PCFC had raised from the Islamic bond. Sultan Ahmed Bin Sulayem, executive chairman of PCFC, said that the listing would give the company “better international exposure” and that it was a “natural choice”. The sukuk, listed by the Dubai International Financial Exchange, is the world’s largest and raised 25% more than PCFC had originally planned.

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