Fresh woes on horizon for DPW’s P&O deal

Dubai Ports World (DPW) could face further international opposition to its acquisition of British ports and ferries firm P&O. The government-owned ports operator, which recently confirmed the abandonment of plans to take over six US ports, faces concerns in India that the company will have a monopoly of the subcontinent’s container handling operations.

With the acquisition of P&O’s assets, DPW now controls India’s three largest container terminals — Nhava Sheva, in Mumbai; Chennai Container Terminal, in Chennai; and Mundra International Container Terminal (MICT), in Gujarat.

Its total responsibilities amount to around half the container handling operations in India, after P&O managed around two million freight containers in the country in 2005. Critics argue that the operator’s market share would effectively constitute a monopoly, and that DPW might be predisposed to divert maritime traffic towards its own container terminals, at the expense of other nearby docks.

Meanwhile, Gujarat State is reportedly considering blocking the deal, on the grounds that DPW’s proposed takeover of MICT violates a previous contractual agreement signed with P&O.

Should the controversy fail to subside, government intervention would appear unavoidable, and in any event, the proposed takeover is required to be vetted by the government before it is allowed to proceed. A monopoly clause, included in agreements signed between the nation’s private ports operators and the government, allows the government to protect itself in the event of a monopoly.

The US$6.8 billion takeover, which will make DPW the world’s third-largest ports operator, has been beset by controversy ever since the Dubai firm outbid Singaporean operator PSA last month.

US president George W. Bush attracted bipartisan criticism after he approved the deal and insisted that it should go through.

In a crushing defeat for the White House, the US Senate voted to block the takeover by 62 votes to two, citing security concerns at the six US ports that would have been taken over by DPW.

DPW has since announced plans to sell all its US ports operations — at the New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia docks — to an American buyer, within the next six months. Collectively, these operations are valued at around US$700 million.

Meanwhile, Dubai-based investment giant Istithmar has reassured the US that the DPW controversy has not affected its plans to invest in the US. The firm completed the takeover of Inchcape Shipping Services, the world’s largest independent marine management services provider, in January, and says it is looking at a number of other potential investment opportunities.