Port operator announces its intention to delist on the basis that its “strategy is not fully appreciated by the equity markets.”
DP World’s parent company Port and Free Zone World has made an offer to acquire the 19.55% of DP World’s shares traded on Nasdaq Dubai, returning the company to private ownership. The offer price is $16.75, representing a 29% premium on the market closing price of $13.00 on 16 February.
“The move will enable DP World to focus on its medium-to-long-term strategy of transforming from a global port operator to an infrastructure-led end-to-end logistics provider. Upon successful offer acceptance, DP World will be 100% owned by Port and Free Zone World, which in turn is a wholly-owned subsidiary of Dubai World,” DP World stated.
In DP World’s view the company remains financially strong, with a track record of profitability. It has been pursuing a strategy to become “the world’s leading end-to-end logistics provider,” and made acquisitions including Unifeeder, P&O Ferries, Continental Warehousing, and Topaz Energy & Marine. However, that strategy, the DP World Board considers “ is not fully appreciated by the equity markets, and consequently not reflected in DP World’s share price performance”.
DP World was partially listed in 2007, and the Board noted that limited liquidity has resulted in small trading volumes and “has not provided the anticipated access to capital”.
Yuvraj Narayan, Group Chief Financial, Strategy and Business Officer of DP World, said: “The DP World Board has concluded that the disadvantages of maintaining a public listing outweigh the benefits. Delisting from Nasdaq Dubai is in the best interest of the company, enabling it to execute its medium to long-term strategy. DP World is focussed on the transformation of the Group and takes a long-term view of investment returns and value creation. In contrast, public markets typically hold a short-term view”. The capital requirements for terminal automation are also a challenging within a structure where investors are looking at performance and profitability on a quarterly basis.
DP World clearly has a greater appetite for risk than its shareholders. The Board said that “ the ports and logistics industry is currently undergoing significant disruption in the form of consolidation of the customer base as well as the vertical integration of a number of competitors. It is critical that DP World is able to continue to respond effectively to this rapidly changing landscape and to invest for the future.”
“Returning to private ownership will free DP World from the demands of the public market for short term returns which are incompatible with this industry, and enable the company to focus on implementing our mid-to-long-term strategy to build the world’s leading logistics provider, backed by our globe-spanning network of ports, economic zones, industrial parks, feeders, and inland transportation,” said Sultan Ahmed bin Sulayem, Group Chairman and Chief Executive Officer of DP World.
“Our focus will continue to be on integrating our acquisitions with our global network of interconnected ports, logistics businesses and economic zones. DP World’s world-spanning footprint puts us in a strong position to lead the disruption of the industry creating a better future for all cargo owners through smarter trade.”