DP World Continues Divestment Streak, Exits Hong Kong

By Dinesh Nair

DUBAI (Reuters) – Ports operator DP World Limited is selling its stakes in two container terminals and a logistics centre in Hong Kong for $742 million as part of a rejig of assets in favour of fast-growing emerging markets.

It is the biggest asset sale by the world’s third-largest port operator since it offloaded most of its Australian business more than two years ago.

DP World, one of the more profitable units of debt-laden Dubai World, has been selling assets globally, exiting markets where it does not have a significant presence and seeking to redeploy funds in fast-growing markets.

“We believe Hong Kong will continue to be a very interesting market. However, our presence was small relative to the market,” Sultan Ahmed bin Sulayem, chairman of DP World said in a statement to the Nasdaq Dubai bourse on Thursday.

As part of the deal, DP World will sell 75 percent of its stakes in container terminals CSX World Terminals Hong Kong Limited, which operates berth 3 of the Kwai Chung Container Terminal, and ATL Logistics Centre Hong Kong Limited (ATL) to a unit of Australian warehouse operator Goodman Group for $463 million in cash.

The firm, which operates more than 60 terminals across six continents, is also selling its 55.2 percent stake in Asia Container Terminal Ltd, which operates Asia Container Terminal 8 West (CT8), to Hutchison Port Holdings Trust, a unit of conglomerate Hutchison Whampoa Ltd for $279 million.

Hutchison Whampoa, a ports-to-telecoms group, is owned by Asia’s richest man Li Ka-shing. Hutchison Port is buying 100 percent of Asia Container Terminals for 3.17 billion Hong Kong dollars ($408.7 million), it said in a separate statement.

The disposals are expected to result in a net gain of $151 million for DP World and help boost its capital levels, the port operator said. It will continue to manage port operations in Hong Kong and expects regulatory approval for the deal by the first half of 2013.

The disposed assets contributed to $39 million of its gross profit in 2012, the company said.

“DP world has looked to clean up some of its non-core assets. But this is a core asset and they sold it because they want to reinvest money into markets they have more control upon,” said Redwan Ahmed, director, equity research at EFG Hermes in Dubai.

“I think they would probably want to invest into Africa and South America. Those should be their targets,” Ahmed said.

In a separate statement, Goodman said it plans to fund $300 million of the deal through raising additional equity. The Australian firm’s shares closed at a 4-year high of A$4.93.

ASSET SALES

DP World’s parent, Dubai World, shook global markets in 2009 when it asked for a delay in repayment of its debt, leading to a $25 billion debt restructuring and inflicting pain on lending banks.

It was not clear if any of the proceeds of DP World’s asset sales would go towards repayment of its parent’s debt.

“Dubai World will benefit from this only if there’s a huge dividend payout by the company. As of now, the money stays with DP World,” EFG’s Ahmed said.

DP World shares were trading down 0.7 percent on Nasdaq Dubai at 0816 GMT. They have risen 12 percent year-to-date.

The Hong Kong sale is the latest in a series of asset disposals which has seen the port operator – looking to emerging markets to offset a potential economic slowdown elsewhere – shrink in countries such as Russia, Belgium and Yemen.

Its biggest international sale was late in 2010 when it sold 75 percent of its Australian operations to private equity firm Citi Infrastructure Investors (CII) for $1.5 billion.

In deals last year, DP World sold its quarter stake in a Russian container terminal to Global Ports Investment for $230 million.

The firm also sold its operations in Belgium in 2012 and quit its venture in Yemen.

(c) 2013 Thomson Reuters, Click For Restrictions

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