IPO values DP World at over $21b

Dubai: Dubai port operator DP World expects to raise $4.32 billion in the region's biggest initial public offering (IPO) that values the company at $21.58 billion.

As announced last month, the IPO is in the form of a 20 per cent sale of stock by DP World's sole shareholder Port & Free Zone World, a government-owned entity, which will retain majority ownership.

DP World set an indicative price for each share between $1 and $1.30. It is offering 2.822 billion shares to individual and institutional investors, with a "greenshoe" option of 498 million shares.

By exercising such an option, companies can allot more shares if demand is higher than expected.

The IPO will raise $4.32 billion at $1.30 per share at the top end of the price range, making it the Gulf's biggest share sale since Saudi Telecom raised $4.08 billion in 2003 by selling its stock to the public and government funds.

"We are very pleased with the initial response in the IPO. Our pre-marketing has indicated that potential investors are interested in a medium to long-term investment in our shares," DP World vice-chairman and Port and Free Zone World group chief executive officer Jamal Majid Bin Thaniah told reporters.

The final offer price will be determined through a bookbuilding process in which institutional investors will bid for DP World shares. Retail and institutional investors will pay the same final price.

DP World chairman Sultan Ahmad Bin Sulayem said the IPO offers a "unique investment opportunity" as the company expects continued growth amid rising cargo volumes at ports.

The IPO is open to global institutional investors, GCC nationals and residents of the UAE.

The UAE retail offer closes on November 15 and the shares will be listed on the Dubai International Financial Exchange (DIFX) later this month.

DP World, the world's number three port operator by container throughput, has 43 terminals in 23 countries.

It flagship port is Dubai's Jebel Ali and the UAE assets being Port Rashid, Abu Dhabi's Mina Zayed and the container terminal at Fujairah Port.

It has 13 projects under way in several countries, including Britain, China, India, Pakistan, Peru, Turkey and Vietnam.

The new projects are expected to nearly double DP World's container handling capacity to around 90 million TEU (twenty-foot equivalent container units) in 10 years, the company said.

Its capacity was 48.6 million TEUs at the end of 2006, with throughput 36.8 million TEUs for the year. In the first six months of 2007, it has generated throughput of 20.3 million TEUs.

DP World chief executive officer Mohammad Sharaf said the volume grew at double the average market growth of about 10 per cent last year.

Growth: Earnings likely to be $1.44b next year

• DP World generated $705.3 million of earnings before interest, taxes, depreciation and amortisation (Ebitda) in 2006. A consensus of analysts expects this year's Ebitda at $964 million, growing to $1.44 billion in 2008.
  
• Yuvraj Narayan, chief financial officer, said the company has current level of earnings "guaranteed for the next 44 years" based on port concession agreements.
  
• "We have consistently grown at twice the rate (shipping consultancy) Drewry has forecast for container traffic. The major part of our assets is positioned in the fastest growing markets like South Asia, China, the Middle East," he said.