DP World bid for P&O tops $44b
Dubai-based port operator DP World yesterday moved to buy its second global port network this year after bidding more than GBP3.32 billion ($44.38 billion) in cash for the venerable British firm Peninsular and Oriental Steam Navigation (P&O).
The deal, which requires approval from P&O shareholders, will make the hugely acquisitive DP World the industry's No3 container port operator with 51 terminals in 30 countries.
'DP World's acquisition of P&O will create a top-three global ports operator with the scale and network to service an increasingly global and consolidating customer base,' DP World chairman Sultan Ahmed Bin Sulayem said yesterday.
'The unparalleled strategic fit of the two companies' complementary global ports portfolios and the strong development pipeline ... is particularly compelling.'
Sultan Ahmed told reporters and analysts during a global conference call that DP World did not intend to sell any of the assets, should the deal be approved.
The all-cash deal represents an offer of GBP4.43 per share and will be unanimously recommended by P&O's board. This is a 46.2 per cent premium to the stock's GBP3.03 price on October 27, the day before P&O said it had received inquiries about a purchase, and 24.5 times the price-earnings multiple on last year's result.
'The price looks very full, valuing P&O at twice the earnings multiples we value Hutchison's port portfolio at,' said Rob Hart, the head of regional transport research for Morgan Stanley.
'To make this deal attractive, DP World would have to grow P&O earnings rapidly over the next few years, which would be challenging.'
The bid comes about 10 months after DP World's predecessor, Dubai Ports International, agreed to pay US$1.15 billion for the global port assets of United States rail giant CSX Corp in a deal which included shares in three terminals in Hong Kong.
Dubai's intentions towards P&O had been in the market for a month, with only the final price undisclosed.
While Singapore's PSA Corp and Hutchison Whampoa were seen as candidates for a rival bid, P&O chairman Sir John Parker said during the conference call that the company had received no other inquiries.
However, a senior port executive who has been looking over the P&O portfolio for the past month did not rule out a counterbid now that the target price was known. 'We will decide over the next few days,' he said, requesting anonymity for himself and his company.
Sir John said that if all went according to plan, the deal could be closed by late February.
