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Who'll Buy Dubai's U.S. Port Operations? |
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3/10/2006 8:58:26 AM |
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WASHINGTON — The Dubai-owned company that pledged to surrender its $700 million worth of U.S. port businesses amid a furor on Capitol Hill wants to guarantee it doesn't lose money on the deal. But now that DP World is out of the political frying pan, it could find itself confronting a fire sale of its American assets.
Faced with unrelenting pressure from Congress, Dubai's ruler said DP World will transfer to an unspecified American company all U.S. port operations it acquired when it paid $6.8 billion for London-based Peninsular & Oriental Steam Navigation Co.
In its statement, DP World said its decision was based on the understanding that it will have time to coordinate the complex transfer and that "DP World will not suffer economic loss."
DP World executives and others in recent weeks have estimated the value of Peninsular & Oriental's U.S. operations at roughly $700 million.
But experts believe it's unlikely DP World can sell its newly acquired U.S. business for $700 million, given the political pressure to quickly hand over those operations to an American company. They warned this could become an expensive case of buyer's remorse.
"It does seem like they're unloading this in the equivalent of a fire sale," said William Reinsch, president of the Washington-based National Foreign Trade Council and a former senior Commerce Department official.
When DP World offered a stunning $6.8 billion for Peninsular & Oriental in early February, analysts were surprised the price had risen so high during the two-month bidding fight between Dubai and Singapore-owned PSA International Ltd. PSA, the world's fourth-largest terminal operator, withdrew from bidding on Feb. 10.
The British firm manages and runs important port operations in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia. It also plays a lesser role in dockside activities at 16 other American ports.
It was unclear which company or companies might run the U.S. port operations. There are only a handful of recognized maritime firms with the resources to acquire all of Peninsular & Oriental's terminal operations in the United States, but DP World could sell the concessions for its U.S. port operations separately.
The largest maritime firms are not based in the U.S., although nearly all of them own and operate U.S. subsidiaries.
It was unclear whether any overseas parent company _ especially one run by a foreign government _ would be acceptable to critics in Congress. In its statement, DP World promised to sell its domestic operations to an unspecified "U.S. entity."
DP World's suitors could include PSA International; Hong Kong-based Hutchison Whampoa Ltd.; Chinese-owned China Ocean Shipping Co.; Hapag-Lloyd AG of Hamburg, Germany; Denmark-based A.P. Moller-Maersk; and Seattle-based SSA Marine.
At Miami's port, an early critic of the Dubai ports deal, Eller & Company Inc., said it was considering an offer to buy out Peninsular & Oriental's operations there and possibly at other ports.
Eller jointly manages and operates a Miami terminal with the British shipping giant. It raised alarms with U.S. lawmakers over the Dubai deal and filed lawsuits in Florida and London to prevent the takeover.
It said it objected to becoming an "involuntary partner" with Dubai's government but previously said it was not in the running to acquire P&O's Miami operations.
"This wasn't on our agenda and not something we had considered," lawyer Michael Kreitzer said Thursday. "But as Congress started to speak out and say there was a dearth of American companies doing this, we started talking to our board of directors about putting a proposal together.
"We could move very quickly, and we're certainly reaching out to see if there is an opportunity for us," Kreitzer said.
At Maersk, a spokeswoman said the company was always looking to expand its global commerce operations but declined to discuss the Peninsular & Oriental situation. Maersk and P&O jointly manage and operate a major cargo terminal in New Jersey's port.
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