Dubai proposes P&O takeover

Peninsular & Oriental Steam Navigation, Britain's largest ports operator, has been approached by the Dubai Government about a takeover.

DP World, a ports company owned by the Gulf emirate, is in talks to buy P&O, people familiar with the negotiations say.

The company has a market value of 2.3 billion ($5.8 billion).

P&O said it had received "a very preliminary contact" from a company it didn't identify.

"Ports are a growth business on a global scale," said Stuart Fraser, a director at Brewin Dolphin Holdings in London. "For Dubai it would be a strategic investment for the long term."

DP World, formed by the merger of Dubai Ports Authority and Dubai Ports International, is expanding in Asia, India and the Middle East to tap rising trade volumes.

London-based P&O, founded in 1837, now relies on its Asian ports for more than 50 per cent of its volumes.

Shares of P&O rose 6.75 pence, or 2.2 per cent, to 310.25 pence on Friday. They have climbed 4.3 per cent this year. The company had net debt of 660.6 million at the end of June.

DP World hired Deutsche Bank to advise on a possible 3 billion ($7.58 billion) bid for P&O and approached several lenders for financing, London's Sunday Times reported, citing unidentified bankers in Dubai.

Sultan bin Sulayem, chairman of the Dubai Ports and Free Zones, the Government-operated entity that owns DP World, and Mohammed Sharaf, chief executive of DP World, declined to comment.

Dubai, a member of the United Arab Emirates, has spent at least US$3.5 billion ($4.98 million) this year on foreign assets, including a stake in DaimlerChrysler and Tussauds.

Gulf economies are booming on record oil revenue expected to reach US$305 billion this year.

P&O, which was founded to transport mail and goods between Britain and Spain, also runs ferries between the UK and France. It had 1.35 billion of revenue and net income of 220.1 million in the first half.

P&O's Asian ports, located in China, India, the Philippines and Pakistan, accounted for 44 per cent of the containers it handled in the third quarter, and made up 58 per cent of the total so far this year. P&O first shipped goods to Asia in the 1850s.

DP World, with origins dating to 1972, last year acquired terminal operations in Hong Kong, China and other countries from CSX for US$1.15 billion as part of a plan to more than double capacity to 20 million containers a year, bin Sulayem said in an interview in Jordan in May.

P&O handled 13.8 million containers in 2004 and has unloaded 10.9 million in the first nine months of this year.

London-based P&O exited the shipping business and has sold more than 300 million of property this year to focus on expanding its ports business, which includes operations in Antwerp, Le Havre and Britain.

- BLOOMBERG