Ports and ferries business P&O agreed to end 168 years of independence today by backing a £3.3bn takeover by Dubai’s DP World.
The owner of the iconic shipping brand, which has been in the bid spotlight since receiving an approach in October, has given its support to a proposed deal that will create one of the world’s top three port operators.
DP World, which is owned by the government of the United Arab Emirates, said it intended to keep P&O’s headquarters in London and described the strategic fit between the two companies as “particularly compelling.”
The price offered by DP World is higher than many analysts had been expecting and comes amid reports that a bidding war may break out for P&O.
Temasek, which already owns the world’s second biggest ports group, the Port of Singapore Authority, as well as Hutchison Ports the world’s largest operator – and Denmark’s AP Moller-Maersk could make rival approaches.
P&O operates 29 terminal container terminals and logistics operations in more than 100 ports, while it also runs ferries between the UK and France, Belgium, the Netherlands, Ireland and Spain.
The ferries arm has struggled in recent years but DP World, which does not have any operations in this area, said it wanted to restore the business to “strong profitability” in 2006.
DP World said there were unlikely to be any job cuts as P&O will be run as a separate business under the leadership of current chief executive Robert Woods.
There is very little overlap between the operations of the two companies.
The P&O pension fund, which currently has a deficit of £200m, will also be protected as DP World has agreed to a one-off cash injection of £125m, followed by further payments over the next five years.
Founded in 1837, P&O carried cargos throughout the empire to Sydney, Calcutta, Singapore, Hong Kong and other colonies in its heyday.
It currently has three divisions – ferries, ports and cold logistics – but has dabbled in a number of sectors outside shipping in its history.
And P&O is currently on the verge of securing planning permission for a £1.5bn ports development in the Thames Gateway area of Thurrock.
P&O chairman Sir John Parker pointed out that the company had not actively sought a sale: “We did not solicit the bid but we received an attractive proposition. It was followed by some very tough negotiations.”
The tie-up is likely to be completed in the first quarter of next year.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said:
“P&O has been on a slow course towards becoming a focused ports operator over recent years with the de-merger of its cruise liner business into what is now Carnival Corporation and the listing of housebuilder Bovis Homes.
“While today’s bid represents a significant premium over the P&O share price just before the bid came to light, investors are likely to sit tight and await developments given speculation surrounding other possible approaches.”
References: EGi News 29/11/05
