Dubai firm promises port sale

DPW calls U.S. operations likely to be transferred in 4 to 6 months

March 16, 2006|By MEREDITH COHN AND GWYNETH K. SHAW | MEREDITH COHN AND GWYNETH K. SHAW,SUN REPORTERS

Dubai Ports World said yesterday that it has received "significant interest" from potential buyers for its U.S. port operations and expects to sell them over the next four to six months under an agreement it made to hand over the newly obtained assets to an American company.

The announcement clarifies an earlier statement that appeared to allow it tangential ties to the ports - a prospect likely unacceptable to lawmakers of both parties who continued their efforts yesterday to officially ban the company from U.S. seaports.

The company's purchase of Peninsular & Oriental Steam Navigation Co.'s global assets, in the works for months, closed last week.

"I want to say clearly and unequivocally that the sale will be to an American buyer. That should allay Congress' concerns," said Michael Seymour, president of P&O North America, the U.S. subsidiary for sale, in a conference call to reporters yesterday.

The next buyer has become a topic for speculation as some maritime analysts thought U.S. operators were not big enough or financially strong enough to take on all contracts in 21 U.S. ports. The price tag is unknown, but the U.S. portion of the global P&O portfolio has been valued at about 10 percent of the $6.8 billion sale, or $680 million.

When Dubai Ports World agreed to the sale last week, it demanded that it suffer no economic loss.

The contracts at the public ports - including the largest ones in Baltimore, New York, New Jersey, Philadelphia, Miami and New Orleans - could end up in the hands of an existing U.S. operator or a nonshipping related entity such as a private equity firm.

The world's largest operators, all foreign-owned, were mentioned as the most likely candidates in an unlimited sale.

Singapore-based PSA Corp., the world's second-largest operator, had been a bidder the last time P&O was for sale.

Only a few large U.S. operators remain after years of consolidation. Most port operations are now run by foreign-owned companies, including some such as Dubai Ports World and PSA that are controlled by their governments.

But lawmakers insisted on an American owner in this case, to the surprise of many port security and shipping experts, who saw no threat from the Dubai company despite other serious security concerns.

Possible U.S. buyers

Seattle-based SSA Marine, the world's ninth-largest operator, has been named as the most obvious potential buyer from the United States.

An SSA spokesman said yesterday that he had no comment.

Other possible buyers, according to industry experts, are Marine Terminal Corp., an Oakland, Calif.-based operator; Maher Terminals Inc., a Berkeley Heights, N.J.-based operator; and Crowley Marine Corp., an Oakland-based marine transportation and logistics company.

The buyer could be a combination of firms, or P&O Ports North America could be divided up to make it more affordable to operators, despite P&O's expectation that it would be sold whole. Private equity firms that typically want a higher return on their investment may only want the top performing assets.

P&O said it would continue operating as a separate entity run by Westerners until the sale. According to the company, offers would be considered based on "value, deliverability and the continuity of management, employees and customers."

In Baltimore, P&O officials said that many of the employees, nearly all of them U.S. citizens, have been kept at their jobs through several different operators.

"There is a certain expertise required," Mark Montgomery, P&O's senior vice president of East Coast operations, said this week. "I don't expect much to change."

Baltimore officials said they would be paying attention to that, and to whether the new company is financially capable, experienced and focused on security.

City Solicitor Ralph S. Tyler noted yesterday that most of the contracts to operate terminals and handle cargo, as well as lease land, sheds and equipment, include a requirement that the company seek approval from port management and, in some cases, the state Board of Public Works, if ownership is transferred. The port could nullify the contracts, which account for about 65 percent of port operations, although other legal experts say that could bring litigation.

F. Brooks Royster III, director of the Maryland Port Administration, said in a statement that he, too, would want to review details of the sale.

In Washington, the House pressed ahead with a provision that would block Dubai Ports World from taking over any leases or contracts at U.S. seaports, as part of legislation providing $91 billion in supplemental spending for the wars in Iraq and Afghanistan and for victims of Hurricane Katrina.

Yesterday, Rep. Wayne T. Gilchrest, a Republican from the Eastern Shore, offered an amendment to strip the language from the bill, but it was overwhelmingly defeated.

The bill is expected to pass the House today.

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