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Remember the furore when Dubai bought shipping company P&O a few years back? Opponents on both sides of the Atlantic were up in arms that an Arab Government would own some of their biggest ports. In the US, critics included senators from Illinois and New York — now President and Secretary of State respectively. One American company tried to block the deal in London's High Court.
DP World, the state-backed company that eventually bought P&O, navigated the political and legal storm. Now it faces a sterner test: the global downturn is squeezing the assets it bought as part of that deal, which made it the world's fourth biggest operator of container ports.
DP World announced preliminary results this week, with chief executive Mohammed Sharaf candid about the state of the industry. The business grew in 2008 as a whole, but saw a sharp slowdown in the fourth quarter. “We expect the current difficult conditions to remain for the foreseeable future,” he warned.
The company announced a raft of measures in response, including a hiring freeze, preserving cash and reviewing expansion projects. This could impact London: DP World is behind the London Gateway development in Thurrock.
Still, the chief executive has an obligation to his shareholders, and they'll take all the help they can get.
In 2007, DP World sold stock to the public, in part to finance the P&O deal. Investors snapped up the shares at $1.30 each. This week, as the company published its trading statement, they were little changed on the Nasdaq Dubai stock market at just 25 cents. That values the company at a little over $4 billion — well below the $5.7 billion it paid back in 2005 for P&O alone.
* Bank Sarasin is the latest international fund manager to seek bargains on Gulf stock markets. Last year, the main Dubai index fell 72%. Sarasin-Alpen & Partners says it plans to raise $100 million for a new fund, which will buy shares in six Middle East markets including the UAE and Saudi Arabia.
* Dubai may have reason to mourn the passing of two figures from the US banking elite. Late last year, Citigroup chairman Sir Win Bischoff ranked Dubai among its “most significant markets”. Merrill Lynch chief executive John Thain visited Dubai's financial centre in October, pledging to grow the business in the region. Within the past week it has emerged both men are to leave their jobs. Dubai will hope for similar backing from their successors.
