DP World sells 75pc stake in Australia unit to Citi Infrastructure
DUBAI: DP World Ltd., the Dubai-controlled container terminal operator, raised A$1.5 billion ($1.5 billion) selling a stake in its Australian unit as its parent works to reduce debts, Bloomberg reported .
Citi Infrastructure Investors and a partner agreed to buy 75 percent of the unit, which operates terminals in five Australian ports, DP World said in a statement today. The company expects regulatory approval for the transaction by the end of the first quarter.
DP World plans to use all the proceeds to repay borrowings, as parent Dubai World delayed payment on more than $30 billion of debt and unpaid bills built up by constructing palm-shaped islands off the Dubai coast, and amassing stakes in companies including luxury retailer Barneys New York Inc. and U.S. casino group MGM Mirage. The deal will also pare DP World's reliance on Australia as pending competition from Hutchison Port Holdings Ltd. threatens its market share of about 50 percent.
"The Australian assets are great, but it could be a good time to monetize it because we don't know whether the recent strong performance is sustainable," said Redwan Ahmed, a Dubai-based analyst at EFGHermes Holding SAE. "The share has rallied recently and this deal is already priced in," said Ahmed, who has a "neu- tral" rating on the stock.
DP World rose as much as 5.5 percent to 63.5 cents and traded at 63.4 cents as of 11:19 a.m. in Dubai, giving the company a market value of $10.5 billion.
The company had net debt of $5.4 billion at the end of June, according to its first-half results statement.
The deal "provides a great opportunity for DP World to remain actively involved in Australia whilst delivering on our strategy to monetize assets as part of DP World's ongoing goal to reduce leverage and focus on higher margin markets," Chief Financial Officer Yuvraj Narayan said in the statement.
The terminal operator had total long-term liabilities of $9.3 billion at the end of June, according to its first-half results.
DP World Australia runs terminals in Brisbane, Sydney, Melbourne, Adelaide and Fremantle with a capacity of more than 3.5 million 20-foot equivalent units a year, according to the statement. The Australian unit had earnings before interest, tax, depreciation and amortization of A$96 million in 2009, it said.
DP World Australia and Asciano Ltd.'s Patrick unit each handle about half of the nation's container shipments, UBS analysts led by Simon Mitchell said in a Dec. 6 note. DP World's market share may fall to 36 percent over the next five years and Patrick's to 43 percent, as Hutchison, the world's largest container-terminal operators, adds facilities in Brisbane and Sydney, they said.
Sales of Australian businesses this year have more than doubled to $115 billion from a six-year low in 2009, as buyers sought assets in one of the few developed markets to avoid recession during the global financial crisis. Today's transaction takes the value of such deals this quarter to $59 billion, the most on records dating back to 1998, according to data compiled by Bloomberg.
DP World, which operates 50 terminals across Asia, Europe, Africa and the Americas, said Oct. 25 thirdquarter cargo-volume grew 14 percent to 13 million containers, after a global trade rebound increased freight handling. Traffic fell 8 percent last year as the worldwide recession cut demand for moving goods.
Second-half earnings are likely to be better than the first, DP World said Aug. 18, after reporting a better-than-forecast profit in the six months to June of $176.6 million.
Moreover, The National reported DP World's shares rose to their highest level in two years after the company sold a $1.5 billion stake in its Australian unit to help cut down on debt.
Shares in the Dubai-controlled container terminal operator rose 4.6 per cent to 63 cents on Dubai's second bourse, NASDAQ Dubai. It gives the company a market value of $10.5 billion.
"It shouldn't come as a surprise as they have been mulling an IPO [of the Australian unit] since January," said Shehzad Janab, head of asset management at Daman Investment.
"We knew they had various international parcels and that left the Australian assets. After the reshuffle, it was either an IPO or a trade sell," he said.
The Dubai Financial Market (DFM) General Index rose 0.3 per cent to 1,630.78 points and the Abu Dhabi Securities Exchange General Index slipped 0.06 per cent to 2,696.79 points.
Energy giant Taqa was one of the top gainers in Abu Dhabi, as it rose 1.4 per cent to Dh1.47. It secured a $3 billion revolving credit facility from 20 international banks, which will be used as part of its expansion plans.
In Dubai, Emaar Properties led the momentum as it rose 0.6 per cent Dh3.51, reversing losses it made.
Oil futures gained 1.1 per cent to $89.82 a barrel in New York, the highest since October 2008, as signs of US economic recovery buoyed investor speculation that fuel demand will increase in the world's largest oil consumer. -PB News