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UK port deal has US security overtones
The US$6.8 billion sale of the UK's Peninsular and Oriental Steam Navigation
Co (P&O) to Dubai-based sovereign-backed DP World has created some tension
on Capitol Hill over US national security issues.
The company's main business is a portfolio of 29 container terminals within
its 51 shipping terminals, and logistics operations in about 20 countries.
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The P&O portfolio includes operations at six US seaports.
The US has made no secret over its concern that terrorist activities could
be launched against the US through US seaports.
DP World will now have operations in the US ports of New York, New Jersey,
Baltimore, New Orleans, Miami and Philadelphia.
The Bush administration has not raised objections to the deal as it
considers the United Arab Emirates (UAE) to be an ally in the fight against
terrorism.
Leading the charge against the deal is New York's Senator Charles Schumer, a
Democrat, who has questioned the prudence of giving a UAE company access to
US ports. Schumber notes that some of the 11 September 2001 terrorists had
connections to the UAE although most of those involved came from Saudi
Arabia. That country is also considered to be an ally by the Bush
administration.
However, some of the money used to finance the 11 September activities was
wired through the UAE banking system and two of the terrorists were UAE
citizens.
Schumer has called for a public review of the deal before DP World is
permitted to operate in the US.
The Port Authority of New York and New Jersey, which operates seaports in
those two states, also noted that the deal raises some concern and plans to
review the transaction. DP World will hold the balance of a 30-year lease on
a container terminal at Port Newark that was signed in 2000.
The Senate Banking Committee will also hold a hearing next week on the sale.
The deal has also drawn the ire of two influential senators, both Democrats.
Senator Hillary Clinton of New York and Senator Senator Robert Menendez of
New Jersey plan to introduce legislation aimed at blocking DP World from
buying P&O Ports and the terminals it operates at US ports because of
security concerns.
The measure to be proposed by the two senators is expected to contain
language that would bar companies owned or controlled by foreign governments
from acquiring US port operations.
The charge has also been taken up by Republican Senator Lindsey Graham of
South Carolin and Democratic Senator Barbara Boxer of California.
Aside from the political fallout, the deal was an excellent coup for P&O
shareholders.
In the face of a late challenge from the Port of Singapore Authority (PSA),
DP World raised its bid from 443 pence to 520 pence per share, a figure that
represents a premium of 71.3 per cent over where P&O’s shares traded prior
to market speculation of a takeover.
This bid was intended to be, and proved to be, a killer blow for PSA which
in early January made a bid of 470 pence per share trumping DP World’s
original offer of 443 pence per share.
PSA retired from the fray issuing a statement on the 10 February that
tellingly said: “We believe the price we have offered at 470 pence per unit
of deferred stock represented a full and fair value. For PSA to pay more
than this price would not be compatible with commercial business sense and
PSA’s future success.”
Outside the US, much of the criticism is seen as political posturing.
P&O has already received preliminary approval -- and expects to see final
approval this year -- for the proposed mega-development on the River Thames
in the UK, the so-called London Gateway project, which includes both a
container port and a business park.
While pundits may not be fully convinced that the UAE is a US ally, the UK
government has proven itself to be a friend of the US.
It is unlikely that the UK would turn a deaf ear to security concerns
related to the P&O sale -- if there are any tangible security concerns.
Disclaimer
James Smith is an independent columnist for this web site. James Smith may
hold long or short positions in any of the stocks mentioned in this article
and those positions can change at any moment.
InvestorIdeas.com Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp, InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article. James
Smith is a freelance writer. Nothing in the articles should be construed as
an offer or solicitation or recommendation to buy or sell any specific
products or securities. Past performance does not guarantee future results.
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