A two-way bid battle is on the cards for P&O, the world’s fourth-largest ports group, after its management board switched sides today and backed a £3.5 billion takeover bid from Singapore ports authority PSA.
PSA’s 470p a share all-cash bid for P&O, led by chief executive Robert Woods, trumps a previously agreed offer for the ports, ferries and property group from Dubai Ports, which had offered 443p a share, also in cash.
Today’s move by PSA is highly likely to prompt a response from DP, which is owned by the state of Dubai and had its preliminary offer accepted by P&O late last year.
A fight over price is all the more likely as the new offer from PSA remains at a lower level than P&O’s current share price, which has been heavily boosted by takeover speculation over recent months.
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The shares closed last night at 507p, valuing P&O at more than £3.8 billion.
PSA is owned by Temasek Holdings, a Singapore government investment agency that already owns 4.1 per cent of P&O.
However, PSA’s new offer represents a 55 per cent premium to the 303.5p a share closing price for P&O towards the end of last October, when bid speculation about the group first began to emerge.
As it unveiled its recommended offer for P&O, the Singapore-based group said Mr Woods would stay on after a completed deal and take charge of the British businesses and become chairman of the ferries division.
Mr Fock Siew Wah, PSA’s chairman, said: “I strongly believe that the combination of PSA and P&O, two great companies with complementary strategic, operational and geographical growth positions, will create the strongest business platform that will enable us to serve our global customers better and deliver significant value in the future to our stakeholders.
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“We will have an enlarged port group that will have the financial resources, scale and global connectivity to compete even more effectively and successfully in the port marketplace.”
Merging PSA and P&O would create a powerhouse of a global ports operator, possibly the largest in the world. P&O Ports operates 29 container terminals and logistics operations at more than 100 ports in 19 countries.
A merger between P&O and Dubai Ports would produce the third-largest global ports operator.
For the six months to the end of June last year, P&O reported operating profits of £76.9 million on turnover of £1.3 billion, against annual operating profits for the previous year of £214.5 million.
Sir John Parker, the chairman of P&O, said: “PSA’s offer to deferred stockholders of 470p represents a 6 per cent increase over Thunder’s offer [DP’s bid vehicle] of 443p. With regard to deliverability, PSA has given us undertakings to meet any requirements of the regulatory authorities.”
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PSA is being advised in its bid by UBS, its corporate broker, and Goldman Sachs. P&O has its corporate broker, Citigroup, and financial advisers at Rothschild.
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