Temasek said it bought 8 million shares in P&O on Thursday, raising its stake to 3.24 per cent, and yesterday its brokers UBS were again in the market, offering to buy P&O stock for up to 460p - a substantial premium to the 443p-a-share offer from Dubai Ports World (DPW).
P&O shares soared on the news and closed 12 per cent higher last night at 494p, valuing the company at £3.7bn. By close of play Temasek was understood to have raised its shareholding to almost 5 per cent.
It was not clear whether the stake building was the prelude to a full-blown bid for P&O or simply an attempt to frustrate the DPW offer. The Emirates-based company needs acceptances from more than 90 per cent of P&O's shareholders to buy out the remaining 10 per cent.
Sources close to Temasek said the share buying did not mean that it was about to make a counter-bid. But dealers were puzzled as to why the Singaporeans had stopped their stake-building at 5 per cent, which would not be enough to prevent the DPW offer going unconditional. DPW needs the backing of 75 per cent of P&O's shareholders to succeed with the takeover.
A merger of P&O and DPW would create the world's third largest ports group, putting pressure on the market leader, Hong Kong's Hutchison Whampoa, and PSA International of Singapore, which is 100 per cent-owned by Temasek.
For this reason, both Hutchison and Temasek have been seen as potential rival bidders since it emerged in October that DPW had made an approach to P&O. The board of P&O, led by chairman Sir John Parker, denies that it ever tried to generate an auction once DPW's interest in buying the company became known.
PSA International operates 17 ports in 11 countries including the world's largest transportation hub in Singapore itself and a takeover of P&O, which operates 29 ports in 18 countries would enable it to leapfrog Hutchison.
Temasek would have no difficulty in mounting a bid, even though the offer agreed from DPW already represents a 46 per cent premium to P&O's price before news of the takeover talks emerged. Temasek would also have to pay a £30m break fee if P&O were to switch allegiances and turn its back on the DPW offer.
Temasek is backed by the Singapore government and has total investments of S$103bn (£35.3bn). Its interests range from transportation, media and engineering to financial services, property and pharmaceuticals. The companies Temasek controls include Singapore Airlines, Singapore Telecommunications, the world famous Raffles hotel group and Neptune Orient lines, one of the world's biggest container shipping companies.
A takeover of P&O would bring 170 years of British maritime history to a close. After launching its agreed bid earlier this week, DPW pledged that it would keep P&O's management, brand, London headquarters and its troubled ferries division. It also said it would press ahead with plans to develop a new £1bn container port at Thurrock in Essex known as the Thames Gateway.
The oil-rich state has visions of building up DPW in the same way as its airline, Emirates, has grown from a small regional player to a major global carrier with more long-haul aircraft on order than British Airways has in its entire fleet.
Temasek and UBS refused to comment last night on the stake building. P&O also refused to comment.
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