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Speculation over $3.5b IPO mounts

The additional payout DP World would have to make to investors if an IPO does not go ahead, coupled with the potential difficulty and higher costs associated with raising debt finance in the current market conditions, point to the likelihood of an upcoming IPO.

DP World is estimated to be worth about $10 billion, according to analysts at Drewry Shipping. It is expected to raise about $3.5 billion to finance expansion plans, selling up to 30 per cent of its shares to the public.

Investors in the partially convertible sukuk, launched in January 2006, have the option of converting 30 per cent of their securities into any IPO undertaken by subsidiaries of the Ports, Customs and Free Zone Co (or PCFC), DP World's state-owned parent. "Investors bought PCFC sukuk in anticipation of a possible IPO before they mature in January 08," managing director at Shuaa capital, Haissam Arabi, said, speaking to Dow Jones.

"It doesn't make sense to roll it over and renew the sukuk. They'll have to pay investors 10 per cent rather than 7 per cent," he said. Investors in the sukuk were issued with a guarantee that in the event of the flotation being cancelled the yield would step up from 7.125 per cent to 10.125 per cent.

Under a recent deal negotiated with the US stock exchange, Nasdaq, the holding company for DIFX, Borse Dubai holds a 28 per cent stake in the London Stock Exchange (LSE). This will mean that any listing on the re-branded DIFX-Nasdaq exchange can be listed on the LSE as well. Analysts believe that a listing would benefit the company by enhancing its transparency, giving it more bargaining power when making acquisitions.

DP World paid $6.8 billion last year to acquire Peninsular & Oriental Steam Navigation Company (P&O). DP World management has previously said that it plans to spend over $3 billion over the next five years to build new container ports and expand those under management.

The company aims to double handling capacity to 84 million 20-foot container units a year by 2016 to catch up with bigger rivals Hutchison Port Holdings Ltd and PSA International Pte. In particular, it is aiming to buy or expand port facilities in China and India.