P&O warms to cold storage with California purchase

PENINSULAR & Oriental Steam Navigation Company is moving deeper into cold storage with the pounds 18m acquisition of Pacific Cold Storage of California.

P&O, through its subsidiary P&O Cold Storage, is already the market leader in Australian refrigeration, warehousing and distribution. The latest deal will put the company among the top 10 cold storage operators in the world.

The acquisition, financed by pounds 2.54m nominal of P&O deferred shares, consists of 12 million cubic feet of refrigerated storage space at four warehouse sites in the greater Los Angeles area.

Pacific Cold Storage is mainly engaged in general warehousing for a wide range of local and international food suppliers.

Richard Hein, managing director of P&O Australia, said that P&O expected to expand cold storage in the US towards more compete distribution services for food manufacturers and retailers, particularly supermarkets.

Richard Sanderson at Panmure Gordon said the deal fitted in well with P&O's strategy of cross- border growth, and described it as 'quite a reasonable acquisition'.

He said it would not have a major impact on P&O's earnings or share price, given its relatively small scale in relation to P&O's size.

Mr Sanderson said: 'It fits the pattern of P&O's recent strategy. They've been redeploying money that has been in financial assets - such as the stake in Modern Terminals that was sold to a company owned by the Chinese government - and selling some properties, and they've been putting that money into assets they can own outright.'

P&O already owned considerable cold storage in the US and was presumably trying to add to it. 'It's all part of the international trading aspect of the company,' he said.

Cold storage in the US could be a growth area, he added. In Europe, the industry was still very much affected by agricultural policies involving food storage even though the use of such intervention storage was falling as stocks were reduced. Neverthless, the United States operated in a different environment.

P&O deferred shares closed at 713p, 20p up.