Canada fund invests $5b in DP World’s Dubai assets

International port operator DP World and CDPQ, a global institutional investor, announced on Monday an investment of $5 billion in three of DP World’s flagship UAE assets.

CDPQ, Canada’s largest pension, will invest $2.5 billion in the Jebel Ali Port, the Jebel Ali Free Zone, and the National Industries Park through a new joint venture in which it will hold a stake of approximately 22 per cent, with the remainder of the transaction being financed by debt. Other long-term investors will have the opportunity to acquire an additional stake of up to $3 billion.

The transaction implies a total enterprise value of approximately $23 billion for the three assets, DP World and CDPQ said in a joint statement.

Tranche 1 ($5 billion) of the transaction is expected to close in the second or third quarter of 2022, and tranche 2 (up to $3 billion) is expected to close during the fourth quarter of 2022.

The transaction comes nearly two years after DP World struck a deal with Canadian infrastructure investor CDPQ, which holds C$298.5 billion in net assets, to pour $4.5 billion of new capital into their joint venture already spanning four continents and 18 terminals.

DP World CEO Sultan Ahmed bin Sulayem said the sale helps lighten the company’s debt burden as it faces “the challenges of the pandemic and recent global economic conditions,” an apparent reference to global supply chain snarls that have sent production and labor costs soaring.

“We believe this new partnership will enhance our assets and allow us to capture the significant growth potential of the wider region. The transaction also achieves our objective of reducing DP World’s net leverage to below four times net debt to Ebitda,” said Sulayem.

“The significant strengthening of our balance sheet, the continued resilience of our business, diversity in our portfolio and continued focus on supply chain solutions will support our target of achieving a strong investment-grade rating for the group. Overall, we believe this transaction provides a strong platform for the UAE assets to meet their long-term growth objectives, while the stronger balance sheet supports the group’s wider end-to-end supply chain solution strategy, which will drive sustainable value for all DP World stakeholders,” DP World chief said.

CDPQ’s executive vice president, Emmanuel Jaclot, said the transaction gave the global retirement fund “exposure to new fast-growing markets and trade routes in Africa and South Asia.”

“Today, we are pleased to deepen our long-standing relationship with a world-class logistics and supply chain operator by investing in this strategic trade infrastructure, one that will play a pivotal role in the evolution of the global economy. DP World is well-positioned to provide innovative solutions to their customers worldwide, and we welcome this opportunity to invest in a best-in-class group of infrastructure,” said Jaclot.

The Jebel Ali Port, one of the world’s largest that sits on the eastern side of the Arabian Peninsula, is also the region’s busiest container-handling facility. The free zone adjoining the port is one of Dubai’s key economic development zones, allowing companies to sort and assemble products without the complications of clearing customs.

The assets will remain within the DP World Group, the companies said, with day-to-day operations unaffected.

DP World runs operations as far east as Brisbane and as far west as Prince Rupert, Canada. The company has expanded aggressively into East Africa.

The global ports operator has returned to private hands and is now a wholly-owned subsidiary of Dubai World, a government investment company. In early 2020, Dubai delisted the state-controlled company as it sought to pay back the debt owed by the parent company amid an economic slowdown triggered by the 2014 collapse in oil prices and geopolitical turmoil.

— issacjohn@khaleejtimes.com