End of an era as last remnants of P&O fall to Dubai for £3.3bn

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The Independent Online

DP World, the state-owned Dubai ports business which agreed to buy P&O for £3.3bn yesterday, is to keep the British company's troubled ferries business, its London headquarters, current management, employees and the brand. The buyer is also committed to a planned giant new £1bn container port, Thames Gateway at Thurrock, Essex.

Announcing the agreed deal, which ends the Peninsular & Oriental Steam Navigation Company's 170-year history as an iconic British business, P&O's chairman revealed that he had not sought to start an auction to sell the group once DP World made an approach. And no other party has contacted P&O about a bid since then.

Sir John Parker said that P&O had not been trying to attract a buyer when DP World's chairman, Sultan Ahmed Bin Sulayem, came calling. "The company was not for sale but Sultan a month ago put a respectable figure on the table," Sir John said. "There then followed tough negotiations to get to a number we were comfortable recommending ... There was no effort to start an auction because the company was not for sale, if the approach led to a deal, then so be it."

Although the 443p-a-share transaction came at a heady 46 per cent premium to the P&O share price before DP World's interest was revealed, analysts said yesterday that a counter-bid could not be ruled out.

There was an outside chance that a rival could make a play for P&O, especially as the other leading operators are big and rich. That could come from Hong Kong's Hutchison, the Port of Singapore or Denmark's AP Moeller. Christopher Combe, of Bears Stearns, said: "In light of the secretive nature and/or lack of transparency among potential rival bidders, we hesitate to dismiss the possibility of a competing bid emerging."

Thedeal brings together P&O, the world's No 4 player, which has 29 container ports in 18 countries, with the No 7, DP World. The combined company will be the third-biggest operator, or joint third with AP Moeller, depending on how market share is assessed.

Measured by volumes passing through their ports, Hutchison is by far the biggest, with 13 per cent of the market, followed by Singapore at 9 per cent. P&O-DP World and AP Moeller are only marginally behind Singapore. The Dubai company has already pulled off one other major acquisition recently when it bought the US group CSX Corporation for $1.15bn (£640m).

Mr Bin Sulayem likened the rise of DP World to Dubai's airline, Emirates, which started as a small regional player but is now a major global carrier. He said that DP World's customers had wanted its services in more parts of the globe and it bought P&O because DP World was weak in Europe and the US.

He said the decision to acquire P&O had been made by the DP World board, not the Dubai state, and financing for the deal would also come from DP World's own resources and bank borrowing, not the government.

On the P&O ferries operation, Mr Bin Sulayem would not spell out DP World's longer-term plans. The business, which employs 4,500 and runs services between the UK and the Continent, has been loss-making but is expected to be back in profit next year. P&O has sold most of its other non-port assets. "Our offer is for all of P&O, including the ferries. We are pleased with the restructuring carried out there," Mr Bin Sulayem said. DP World will pay off £125m of P&O's £200m pension fund deficit, with the remainder filled over the next five years.

Sir John said that UK investors tended not to appreciate the true worth of companies. "I feel a degree of sadness that the real value of a group only emerges when a bid arrives ... [Before that] You can talk about being undervalued till you're blue in the face but it does not get you very far."

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