Questions remain about DP World stake in U.S. ports

Questions remain about DP World stake in U.S. ports    Thursday’s announcement by Dubai Ports World that it was spinning off the U.S. port facilities it acquired last week as part of the merger with Peninsular and Oriental Steam Navigation Co. had several conditions attached to it that have some lawmakers wondering if, and when, the company will sell its total stake in the properties.
   Rep. Peter King, a leading opponent of the sale, said he was satisfied that the deal was dead. But several lawmakers said Congress should put the nail in the coffin, and pass legislation blocking the sale on national security grounds.
   Sen. Charles Schumer, D-N.Y., on Friday asked President Bush for more details about DP World’s offer to transfer its U.S. operations to an American company.
   “DP World will transfer fully the U.S. operations of P&O Ports North America to a United States entity. This decision is based on an understanding that DP World will have time to effect the transfer in an orderly fashion and that DP World will not suffer economic loss,” the state-owned company said.
   Schumer asked the president to clarify whether DP World would retain any control of operations at any of the 22 terminals, including whether there would be any financial ties and separate board of directors for the U.S. entity.
   Before DP World’s decision to back out, some legislators had suggested that DP World might be able to pass muster if it set up a North American subsidiary or outsourced management of the ports to an American firm. But those compromise plans were quickly drowned out by the chorus of opposition on Capitol Hill.
   Whatever the ultimate outcome, it’s likely that there will not be a quick sale and that DP World will be in charge, through P&O management, of U.S. ports for some time to come.
   “I don’t think they are going to rush into anything,” said Peter Shaerf, a managing director for AMA Capital Partners, a merchant bank based in New York.
   Deutsche Bank, which handled the acquisition of P&O for DP World, plans to run a formal process to solicit buyers for the U.S. assets, said Shaerf, who spoke with Deutsche Bank officials Friday.
   Shaerf said his back-of-the envelope calculation is that the P&O properties could fetch about $700 million, but they will have more value if sold as a group rather than piecemeal.
   DP World indicated it expects to be made whole by any deal and will wait until the right offer comes along.
   “There’s no fire sale sign up here,” Shaeref said about companies who may be thinking about picking up the U.S. terminals at a discount.
   Anybody who has an asset-focused fund or is an asset-based business is a potential buyer, he said. But private equity firms usually expect higher returns than terminal operations normally generate.
   Meanwhile, the Office of the U.S. Trade Representative said that the United Arab Emirates has delayed talks on a free trade agreement with the United States after DP World pulled out of the port deal, according to news reports.