P&O disposal plan to raise pounds 2bn
Wednesday 24 March 1999
The radical programme will see the disappearance of over pounds 2.5bn of the transport group's pounds 5.9bn turnover, through the flotation of its Bovis construction arm, the P&O Nedlloyd containers joint venture, and the sale of its US and UK properties, including the Olympia exhibition centre in London's Earls Court.
News of the changes came after P&O reported a 14 per cent increase in underlying profits to pounds 415.9m and raised its dividend for the first time this decade.
Lord Sterling, the P&O chairman, said the disposals would bring P&O back to its seaborne heritage and that it could pave the way for a secondary listing in New York. "[Ferries,cruises and ports] will be the engine rooms of this company to drive it into the future," he said.
Lord Sterling said the proceeds of the sales would be used to pay debts and to boost investment in the P&O Stena Line cross channel ferry joint venture, and in the Princess and P&O cruise lines.
Shares in the group soared 5.5 per cent to 860.5p as City analysts welcomed the demise of P&O's conglomerate-like structure. Even though investors had been calling for disposals for some time, few expected such a radical programme. The bulk of the funds, around pounds 1.5bn, will come from the sale of P&O's retail and office properties in Britain and the US. The group said the portfolio could be sold in chunks or as a single company.
The flotation of Bovis Construction, set to be completed within a year, could raise up to pounds 350m, while the listing of the container venture could netpounds 300m. Olympia would probably be sold for about pounds 200m.
Meanwhile, Lord Sterling promised to bring back 50 ships to the UK flag - including the Grand Princess, the world's biggest cruise ship - if the Government introduced a tonnage tax. The levy, currently being considered by the Treasury, would result in lower rates for companies with large ships.
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