DP World may submit counter-offer for P&O

Dubai: The takeover battle for a unit of the UK's Peninsula & Oriental Steam Navigation Co. is expected to intensify amid speculation that a counter-offer from DP World is in the works.

Singapore-owned PSA International, the world's second-largest port operator, invited competition on Tuesday by making a $6.18 billion (Dh22.5 billion) offer for P&O ports and ferries. This tops a £3.33 billion ($5.86 billion, Dh21.55 billion) cash offer in late November from Dubai's DP World, which was endorsed by the P&O board.

Dubai-based marine consultant Frank Kennedy said he was not surprised by Singapore's offer, adding that a bidding war is in the offing.

"The stakes are very high because of the value of P&O will attract several companies to bid for it. DP has to decide now what move they want to take. I think things will become clear over the next few weeks," he said, adding the multi-billion dollar battle will not be a problem for either company, since both are backed by wealthy governments.

Seaborne container trade carrying high-value finished products from toys to electronic goods has seen enormous growth over the past five years. About 80 per cent of global trade is moved by sea.

Hence, Dubai has much to gain as the acquisition of P&O would turn DP World into the world's second-largest port operator with a volume of about 33 million 20-foot containers a year. But competition from Singapore is also stiff because a PSA purchase would make the company the world's largest port operator, ahead of Hong Kong's Hutchison Whampoa.

DP World, which runs its domestic ports of Rashid and Jebel Ali as well as ports in Romania, Germany and India, said in a statement that on Tuesday it remains committed to completing the P&O acquisition.

DP World, in its statement, urged P&O shareholders to take no action regarding PSA's approach. The company said it is considering its position, but remains convinced of the merits of its own bid. "It's now up to DP World to consider increasing their offer," said a London analyst.

Prices for port assets most of which are state-controlled have risen strongly in recent years, fuelled by a three-year boom in shipping on the back of blistering growth in Chinese demand, a global economic recovery and expanding trade.

"Container ports are a rapidly maturing business in Singapore and PSA is doing the right thing. It was pretty clear from the start that PSA would have to go up against Dubai after they made an offer," said a transport analyst at a Singapore stockbroker.

PSA still handles more than half of its total container volume in Singapore the world's busiest container port but is under pressure to reduce its dependence on the city-state.

- With inputs from Reuters