Dubai wants $750 million for P&O Ports

Dubai wants $750 million for P&O Ports    Officials at Dubai Ports World, which was forced by opposition in Congress to give up its stake in U.S. port facilities, are confident they can sell the North American subsidiary in its entirety rather than piece by piece even as their asking price continues to rise.
   DP World acquired P&O Ports North America, which has terminal operating rights and cargo handling businesses in nearly two dozen East and Gulf coasts ports, as part of its $6.8 billion acquisition on March 8 of Peninsular and Oriental Steam Navigation Co.
   The North American subsidiary represented less than 10 percent of P&O’s profits, but based on the acquisition price company officials in congressional testimony earlier this month valued the U.S. business at $700 million.
   Mohammed Sharaf, DP World’s chief executive, said on a live forum on the Financial Times Web site this week that the company expects to raise about $750 million from the sale of the U.S. port business. The new figure suggests that DP World intends to make a profit on the deal.
   Two of the conditions cited by DP World when it agreed to sell off its U.S. operations are that it not suffer any economic loss from the forced divestiture and that the buyer must be a U.S. entity. Industry analysts believe that DP World paid roughly 20 percent more than P&O was worth in order to beat out PSA International’s rival bid for the British company, raising questions about whether U.S. terminal operators or other companies are interested in, or have the wherewithal, to pay an inflated price for the U.S. portion of the deal. Some observers have wondered if DP World would sell its operations in piecemeal fashion to satisfy suitors that may want to cherry-pick certain facilities instead of accepting a bundled package of port facilities.
   But Robert Scavone, executive vice president and general counsel for P&O Ports North America, said DP World intends to sell the terminal operating rights and stevedoring businesses as one lot.
   “We think it’s an attractive business” that will generate good offers, Scavone told Shippers’ NewsWire.
   Infrastructure investment is in vogue now on Wall Street. Last week, a Spanish-Australian joint venture spent $3.8 billion to operate the Indiana Toll Road on Interstate 80 for 75 years. The same group also took over operation of the Chicago Skyway last year. Macquarie, the Australian firm, plunked down $533 million last year for the Dulles Greenway toll road in Northern Virginia and is bidding to manage the Dulles Toll Road in the same area. Equity firms are lining up to invest in infrastructure projects as all levels of government, unwilling to raise taxes, seek private sector help to rebuild the nation’s crumbling infrastructure.
   “Buyers recognize they will have some competition and will need to step up and compete by being able to bid a fair price and be willing to take the whole thing, if that's what's being sold,” Scavone said.
   Speculation on potential buyers has centered around the three largest American terminal operators. Marine Terminals Corp., based in Oakland, has expressed interest in the P&O business. SSA Marine is exploring its alternatives for selling the company or making acquisitions, while refusing to comment specifically on the P&O assets themselves. Maher Terminals at the Port of New Jersey has been quiet about its interest in P&O, although one of the facilities involved is at the nearby Port Newark Container Terminal. The pool of bidders is expected to go beyond terminal operators to include project engineering and investment firms.
   Analysts have said DP World can realize a greater return by selling the U.S. assets as a package.
   “The size of the company does give it an advantage and certain synergies,” Scavone said.
   “When you view the whole package collectively, you find there are a lot of strengths. The ability to spread overhead over many more activities, and the natural hedge you get by being diverse, by being engaged in quite a number of different locations and types of cargo handling,” such as steel, autos, breakbulk, military, passengers and containers, can help a company maintain financial stability, because when the cycle is down for one sector business may be up in another, he said.