Dubai port deal hits snag

Dispute over N.Y.-N.J. claims threatens to torpedo multicity pact

February 16, 2007|By Meredith Cohn | Meredith Cohn,Sun reporter

The Dubai company forced to exit U.S. ports over security concerns now says that its long-awaited deal to sell assets in Baltimore and elsewhere is in jeopardy because officials at the Port Authority of New York and New Jersey are demanding a multi-million payout to approve the transaction.

In a letter to the authority yesterday, officials from DP World and American buyer AIG Global Investment Group accused the port of seeking an unwarranted $84 million fee, and "if the port authority continues with its unreasonable request, the sale will fail."

The port authority replied in a letter yesterday that it is entitled to be reimbursed for improvements under the new contract with AIG.

The port authority accused DP World of using the press to exact benefits.

The letters revealed a nasty turn in negotiations, with both sides accusing the other of standing in the way of the deal that last year became a political fight about foreign owners running vulnerable U.S. ports.

Sen. Charles E. Schumer of New York and Sen. Robert Menendez of New Jersey, both Democrats, pushed for the ports' sale to a U.S. buyer. But yesterday they blasted the port authority for standing "in the way of a deal with major national security significance."

DP World identified AIG Global Investment Group in December as the highest bidder for the port assets that include major contracts to operate or lease terminals in Philadelphia, Tampa, Fla., Miami and New Orleans, as well as Baltimore and New York-New Jersey. It also handles cargo in 16 other ports and operates a cruise terminal in New York.

The price was not disclosed, but DP World expected to get more than $700 million and analysts have said it could be more.

The deal was supposed to close by next month - until the snag in New York.

The Port of New York-New Jersey is one of the nation's largest. The port authority said it has made significant improvements to the Port Newark Container Terminal where DP World operates.

Based partly on its spending there, the authority estimated that DP World would make at least $450 million from the sale based on an investment of about $140 million.

The port authority also said DP World still has not provided financial information it needs to determine what kind of operator AIG would be and if it would invest in the terminal.

AIG didn't directly address that concern yesterday, but said it intended to keep the current P&O managers and workers, and run terminals as they've long been run.

Other ports have agreed to the sale, or do not have the right to request changes, including Baltimore.

At the Helen Delich Bentley Port of Baltimore, DP World does not have a lease, rather it has a contract to operate Seagirt Marine Terminal, the state's point of entry for containerized cargo. The contract expires at the end of October and the port hasn't decided if it will be renewed, according to spokesman Richard Scher.

If officials want a new agreement, the state-owned port would have to issue a request for proposals from all operators.

Since DP World agreed to the sale of Baltimore and other U.S. assets, it has run them as a separate entity under the name of the previous owner, London-based Peninsular & Oriental Steam Navigation Co., or P&O Ports.

DP World bought P&O in March for $6.8 billion but was immediately forced to put the U.S. portion of the portfolio up for sale after an uproar among Washington lawmakers.

The Bush administration had approved the deal, but many Democratic and some Republican lawmakers objected to an Arab-government-owned company operating U.S. ports, long considered vulnerable to terrorist attacks.

The lawmakers were satisfied with the sale to AIG and regulators were expected to approve it and put an end to the matter.

DP World may be forced to find another buyer if its deal with AIG falls apart over the conflict in New York.

Both sides say they are encouraging the other to settle the matter quickly.

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