P&O could fetch £4bn in bid battle

Shares in P&O surged to nearly 500p yesterday as the stock market warmed to the impending bid battle for the ports and ferries operator between its two rival foreign suitors.

Analysts said the two competing state-owned bidders - Dubai's DP World and the port authority of Singapore (PSA) - might have to pay £4bn to clinch the takeover of the 170-year-old shipping company.

Investec Securities said the final bid price could be 500p, while Dresdner Kleinwort Wasserstein said P&O could fetch 525p a share, valuing it at £3.95bn. P&O shares closed 6.4 per cent higher at 498.5p.

PSA, owned by Singapore's state investment company Temasek, has begun due diligence on the company after being given a fortnight to make a formal offer following its 470p-a-share approach on Tuesday. The PSA approach trumped DP World's 443p-a-share offer in November which the P&O board had approved.

DP World indicated yesterday it would come back with a higher offer. Its chairman, Sultan Ahmed Bin Sulayem, said in Dubai: "We are 100 per cent committed to this transaction. Ours is the only serious offer on the table." It is thought unlikely DP World will make a counter bid until PSA has completed due diligence and made a formal offer.

Because both bidders are state-owned and because P&O is seen as a strategic asset, dealers said normal takeover considerations did not apply and P&O could be bought for far more than it was worth on paper.

PSA would become the world's biggest ports operator if it acquires P&O. However, DP World is committed to an aggressive expansion programme, using proceeds from record oil prices.