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PSA makes $6.2 billion takeover approach to P&O

PSA makes $6.2 billion takeover approach to P&O

   The likelihood of a rival bid for London-based P&O Group intensified Tuesday as the board of P&O announced to the London stock exchange that it has received a '3.5 billion ($6.2 billion) approach from rival global port operator PSA International, equal to '4.70 ($8.30) per share.

   If such a bid from PSA materializes it will trump the recent '3.3 billion ($5.8 billion) takeover offer from Dubai state-owned port operator DP World. DP World’s offer is equal to '4.43 ($7.82) per share.

   In recent weeks, Temasek Holdings, the Singapore government-controlled parent company of PSA, has increased its holding in P&O from 2 percent to 4.1 percent. Temasek is also the parent company of Neptune Orient Lines and its liner-shipping unit APL.

   A successful bid for P&O would make PSA the world’s largest port operator, overtaking Hutchison Port Holdings and APM Terminals, with a combined annual throughout of 55 million TEUs, based on 2004 figures. Conversely, DP World would leapfrog PSA as the third-largest global port operator if it acquires P&O, with a combined throughput of 33.3 million TEUs.

   The prospect of a rival bid from Temasek lifted P&O’s share price on the London stock exchange 2.6 percent to '4.69 ($8.28) at close of trading Tuesday.

   The P&O board reconfirmed its support for the DP World offer late December amid speculation that PSA was preparing a bid. In a move that seems to retract that support, the P&O board has decided to allow PSA a limited period of time to satisfy its pre-conditions and put forward a formal offer.

   P&O’s pre-conditions are:

   * Completion of satisfactory due diligence.

   * Final PSA board approval.

   * P&O’s board withdrawing its recommendation of the DP World offer and unanimously recommending the PSA offer (if made).

   * Confirmation from the trustees of the P&O U.K. pension scheme that the funding arrangements to be proposed by PSA are acceptable.

   In light of PSA’s approach, the P&O board has postponed the stockholder and court meetings scheduled for Jan. 20 for approximately two weeks.

   “PSA has not approved the release of this announcement. There can be no certainty that an offer will be made (even if the pre-conditions are satisfied or waived) nor as to the terms on which any such offer might be made,” P&O said in a statement.

   A bidding war now looms as DP World made it clear it still wants P&O.

“The board of Thunder FZE (The company negotiating on behalf of DP World) is considering its position in light of this announcement. However, the board of Thunder FZE remains convinced of the compelling commercial logic of its transaction with P&O and continues to be committed to its successful completion,” Thunder said.

   “A further announcement will be made in due course and P&O shareholders are encouraged to take no action in respect of PSA’s approach at this stage,” Thunder added.

   For DP World’s offer to be successful under the scheme of arrangement, it must be accepted by 75 percent of P&O’s shareholders rather than the normal 90 percent offer structure. P&O has agreed to pay DP World a '34 million ($60 million) inducement fee should any rival party make a successful bid.

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