International ports operator Dubai Ports World is looking at generating billions of dollars following the floatation of a 20% stake of its shares between November 4-15, in what should be the largest initial public offering yet seen in the Middle East.
Formally announcing the IPO on October 21, DP World's chairman Sultan Ahmed bin Sulayem said the company hoped to raise at least $3.5bn after being listed on the two-year old Dubai International Financial Exchange (DIFX).
"'Today marks another step in the development of DP World from a local to a regional to a global player," bin Sulayem said. "But importantly, it also signals the clear intent by Dubai World and Dubai itself to be active participants in the international financial markets, with all the opportunities and responsibilities this brings."
Under the terms of the IPO, residents of the United Arab Emirates (UAE), Gulf Arab nationals and corporations, and overseas institutional investors will be able to take up shares in the company, with applications from bidders in the UAE closing on November 15 and six days later for institutional investors.
The fourth largest port operator in the world, DP World operates 42 terminals and has another 13 projects in development. Active in 27 countries, with more to come, DP World's global operations have the capacity to handle in excess of 48m containers a year. The company is reported to have generated $3.49bn in revenues during 2006.
Speculation that DP World would launch an IPO had been around well before the move was formalised, with bin Sulayem saying on October 4 that such a step was considered every year when looking at financial options for the company.
Quite apart from benefiting Dubai, bin Sulayem said DP World's listing could encourage family-owned companies to go public, a view shared by Per E Larsson, the chief executive officer of Borse Dubai and the DIFX, who said the IPO would give "the DIFX our first anchor listing, and there will be many more to come".
Some analysts suggest the IPO could bring in $4bn or more, depending on the premium offered by investors on the 20% stake up for grabs, though the sale could also spark a wave of selling shares in other companies as investors seek to cash up to buy into DP World.
DP World is increasingly looking east to fuel growth as the port operator aims to double capacity in the next 10 years. On October 29, the company released details of plans to invest $500m in India over the next two years, on top of the $1.5bn it has already put into container terminal developments at the ports of Sheva near Mumbai, Chennai, Visakhapatnam and Kochi.
"India is our main focus for growth and expansion," he said. "We see the export and import business growing everyday in the subcontinent, which is why we want to expand."
On October 31, the company announced it had closed a deal to gain control of a 90% stake in the as-yet-to-be completed Egyptian port of Sokhna, located outside Cairo, spending $670m on its first venture in Egypt.
According to bin Sulayem, the rapidly expanding Egyptian economy and the port's location, which he said would serve as a gateway to the country's growing demands from industry and consumers, were what attracted DP World.
"The port serves Cairo with a population of more than 17m and is also situated directly on the main East-West arterial trade route at the southern entrance to the Suez Canal," he said when announcing the acquisition. "We therefore believe Sokhna has considerable potential."
Located inside a well-developed free trade zone, the port also has good road and rail links, another incentive for DP World, said vice chairman Jamal Majid bin Thaniah.
DP World has apparently long since overcome the disappointment of having to sell off five US ports it acquired last year when it bought out P&O, a move forced by the near hysterical reaction of the American media and some politicians over an Arab company controlling strategic assets.
