DP World to buy P&O

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Nov 29: Dubai agreed to acquire Peninsular & Oriental Steam Navigation Co, founded in 1837 at the height of Britain’s imperial expansion, for 3.33 billion pound to gain container terminals from the UK to China.

DP World, Dubai’s port company, offered 443 pence a share in cash for P&O, Britain’s largest port operator, DP World said in a statement on Tuesday. That is 43% more than P&O’s closing price on October 28, the final trading day before P&O said it was in talks.

The acquisition, the largest ever by a Persian Gulf monarchy, turns DP World into the third-biggest terminal operator as the sheikdom seeks to profit from growing world trade.

Dubai, a member of the UAE, has already spent more than $3.5 billion on foreign assets this year as oil revenue lifts economic growth in the region.

“Dubai has pots of money and they have been targeting the international ports business,” said John Lawson, an analyst in London at Investec Securities. “P&O is very attractive because as well as ports in Asia it has them at the other end of the journey, in Europe and the US.”

Shares of P&O rose as much as 6 pence or 1.4%, to 441 pence and were up 0.6% to 437 pence in London.

The company, which also operates a ferry business, has about 22,000 employees. The Middle Eastern port operator is paying 8.12 times P&O’s earnings before interest, tax, depreciation and amortisation, according to Bloomberg data.

DP World paid 14.7 times estimated Ebitda for the CSX terminals, according to ABN Amro Holding NV. London-based P&O is at least the fourth large UK company to be bought by a foreign rival in the past three months after Cie de Saint-Gobain SA’s purchase of BPB Plc, Telefonica SA’s acquisition of O2 Plc and Deutsche Post AG’s takeover of Exel Plc.

Ports are taking advantage of an expansion in world trade, spurred as goods manufactured in Asia are exported to the US and Europe. World trade volumes are forecast to grow 7.6% in 2006, according to the International Monetary Fund.

DP World, which runs its domestic ports of Rashid and Jebel Ali as well as ports in Romania, Germany and India, in December paid $1.15 billion for CSX Corp’s container terminals in Asia and South America. Based at Jebel Ali south of Dubai city, DP World said the acquisition means its ports will handle about 33 million 20-foot standard containers this year.