Singaporeans spark P&O bid battle

£3.5bn takeover approach from state-owned ports operator trumps agreed offer from Dubai
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The Independent Online

Britain's oldest and most famous shipping company, P&O, was at centre of an overseas bid battle last night after the port authority of Singapore made a £3.5bn takeover approach for the company.

The 470p-a-share offer from PSA International, part of Singapore's state-owned investment company Temasek, trumps a 443p-a-share bid in November from the rival Dubai port operator DP World, which has already been accepted by the board of the UK ports and ferries operator. DP World indicated it was likely to come back with a higher bid, saying it was "committed to the successful completion" of its deal with P&O.

The move by the Singaporeans, revealed after the stock market had closed, forced P&O to adjourn its planned shareholder meeting to approve the Dubai takeover for a fortnight. Shareholders had been due to vote on the £3.3bn offer from DP World on 20 January.

PSA's offer is conditional on the completion of satisfactory due diligence, the withdrawal of the P&O board's recommendation of the Dubai offer and agreement with the trustees of P&O's pension fund on steps to close the £221m deficit in the scheme.

Sir John Parker, the P&O chairman, was handed the offer in person by PSA's chairman Stephen Lee, at a meeting in London yesterday. However, the P&O board said there could be no certainty that an offer would be made or on what terms.

In a response, DP World said it was considering its position in light of the Singaporean approach but remained convinced of the "compelling commercial logic of its transaction with P&O and continues to be committed to its successful completion". This would suggest it is prepared to go higher than 470p a share.

P&O shares closed 12p higher last night at 469p amid heavy trading. In recent days a number of hedge funds have taken aggressive positions in P&O, paying more than 460p for their shares.

PSA - which began buying shares in P&O in December and holds a 4.1 per cent stake, acquired at prices up to 460p - is expected to offer P&O's pension trustees a similar deal to that proposed by DP World, to plug the deficit. DP World has offered an initial cash injection of £125m and close the remainder of the deficit in the following five years.

A merger of P&O and DP World would create the world's third-largest ports group, putting pressure on the market leader Hutchison Whampoa of Hong Kong and PSA. PSA operates 17 ports in 11 countries, and if it succeeds in acquiring P&O, which has 29 ports in 18 countries, it will become the largest port operator in the world.

Dealers said last night a deal would come down to which of the two bidders had the deepest pockets. PSA's owner, Temasek, has formidable resources. Its investments stand at S$103bn (£35.3bn), and among the companies it controls are Singapore Airlines, Singapore Telecommunications, the Raffles hotel group and Neptune Orient Lines, one of the world's biggest container shipping companies.

Whichever overseas predator succeeds in taking over P&O, it will bring a close to 170 years of British maritime history. After launching its agreed bid in November, DP World pledged that it would keep P&O's management, brand, London headquarters and its ferries division. It also said it would press ahead with plans to develop a £1bn container port at Thurrock, Essex, known as the Thames Gateway.

The oil-rich state has visions of building up DP World 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.

Citigroup is advising P&O while PSA is being advised by UBS and DP World by Deutsche Bank. DP World said a further announcement would be made, and urged P&O shareholders not to take any action at this stage in respect of the Singaporean approach.

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