SSA Marine tests the water for buyers
SSA Marine, the largest American-owned container terminal operator and a company frequently mentioned as a possible suitor for Dubai Ports World’s U.S. assets, said Friday it has retained Citigroup to explore the sale of the company or making acquisitions.
The Seattle-based company said it decided to seek a financial advisor to help analyze its strategic options after fielding “inquiries from many companies looking to partner with, or invest in SSA Marine, as well as the opportunities to acquire additional operations.”
Two weeks ago state-owned Dubai Ports World decided to give up its effort to retain 22 East Coast and Gulf Coast terminals it acquired as part of the $6.8 billion acquisition of British ports operator Peninsular and Oriental Steam Navigation Co. after Congress threatened to block the deal on national security grounds. The Bush administration approved the deal, but lawmakers said the initial security clearance was cursory and did not explore possible terrorist connections to Dubai and the United Arab Emirates.
DP World took a lot of steam out of the controversy by declaring it would spin off the P&O Ports North America subsidiary it acquired on March 8. Several conditions placed on the sale by DP World raise questions about how fast a divestiture will take place. DP World said it will sell to a U.S. entity, which limits the field of potential buyers in an industry dominated by foreign companies. It also said any sale would be part of an orderly bid process that takes at least four to six months and could not economically harm the company.
DP World officials have suggested they value the U.S. assets at about $700 million, but it is unclear if other buyers would be willing to pay what many believe is an inflated price due to the high premium DP World paid to wrest P&O from a rival bidder. Whether U.S. taxpayers would be asked to step in and subsidize part of the deal if there are no takers and the government still wants to remove the government of Dubai from operating any port facilities remains unclear.
It makes sense for SSA to check out its options now when its value is high, said Peter Shaerf, managing director of AMA Capital Partners in New York.
DP World has received many inquiries from private equity firms and some of them may be exploring packaging SSA with P&O to get into the terminal business, said Shaerf, who cautioned against reading too much into SSA intentions just because they are testing the market.
'A lot of people mentioned SSA as a likely buyer, so when that happened, I think you got people who said, let's go for them first. Realistically, buying P&O is not an easy transaction for someone who is starting off from ground zero in terms of an asset base' and management capability to run port facilities. 'But if you buy SSA then you’ve got a real platform to go after P&O North America,' he said in an interview.
'None of the alternatives we are exploring would involve selling control of our U.S. operations to a company owned by a foreign government,' SSA spokesman Bob Watters said in a statement.
SSA's statement could also mean that the company wants a strong financial partner to help it go after P&O Ports North America.
SSA, a privately held company, is a logical candidate to buy P&O Ports North America because it is the largest U.S.-based terminal operator. Watters has refused to comment to whether SSA is interested in the P&O assets, but says the company looks at opportunities on a project by project basis. During the past decade, the company has entered into many joint ventures to run port facilities overseas and in the United States.
One of those partnerships is with P&O Ports North America in the ports of Philadelphia, Wilmington, Del. and Camden, N.J.
Marine Terminals Corp., which operates facilities on the West Coast, and Maher Terminals, which operates the largest terminal in the Port of New York-New Jersey, are smaller than SSA but have also been mum about any potential interest in P&O Ports.
Two industry sources said they believe Deutsche Bank, which is handling the sale for DP World, will have bid documents ready in mid-April for interested buyers to review.