Dubai's DP World delivered a potential knockout blow in the contest to buy the British ports group P&O last night, with a new offer worth £3.92bn.
The P&O board immediately recommended the 520p-a-share bid, having earlier yesterday backed a £3.5bn offer from the Port Authority of Singapore. That offer from PSA, worth 470p a share, had trumped an earlier agreed bid from DP World pitched at 443p a share last year.
Nick Luff, the finance director of P&O, said the latest Dubai offer came in yesterday afternoon and it was a "relatively easy decision for the board" to back it. He pointed out that DP World, whose chairman is Sultan Ahmed Bin Sulayem, had already received all regulatory clearances for its deal. "This is a very attractive offer for our shareholders and it is about as deliverable as you can get," Mr Luff said.
The DP World bid comes at a hefty 71 per cent premium to the P&O share price before its original approach. As both DP World and PSA are state-owned entities that want to acquire P&O for strong strategic reasons, normal financial considerations do not necessarily apply. So it is possible the bidding war is not over.
Earlier in the day, some City sources had expressed surprise that PSA had not gone for a more aggressive bid, though analysts believed it had the capacity to increase its offer. DP World appeared to have pitched its bid at a level calculated to try to deliver a killer punch.
Investors, led by hedge funds, had read the situation well, with P&O shares closing at 522p yesterday, well before DP World announced its move.
P&O, which owns ports around the world, is seen as the last independent player available in the sector. The industry is led by Hong Kong's Hutchison, with a 13 per cent market share, followed by PSA with 9 per cent, Denmark's AP Moeller with 7 per cent and P&O with 5 per cent. So buying P&O would enable PSA to leapfrog Hutchison to take the top slot.
The acquisition of the 168-year-old P&O by DP World would make it the No 3 player and thwart PSA's leadership ambitions. P&O has 29 ports, including key assets in the fast-growing Asian economies.
A PSA-P&O deal would face some regulatory problems, especially at the port of Antwerp, which the combined entity would control almost completely. If the British company does end up with PSA, a break fee of £34m would be payable to DP World.
P&O will now press ahead with a shareholder meeting scheduled for 13 February, unless a competing offer worth 546p a share or more emerges. A victory for Dubai would be the second time it has beaten Singapore in a bid battle. In 2004, DP World paid $1.15bn (£650m) for the global port assets of the US group CSX Corp, when PSA had reportedly bid $1bn.Reuse content