Dubai port operator DP World says parent mulling possible stake sale to investment firm

DP World owner in talks with private equity firm

DUBAI, United Arab Emirates — DP World, one of Dubai’s most global companies, said Sunday its main government-owned shareholder is in talks to possibly sell a minority stake in the port operator to a Middle East private equity firm.

A successful deal could provide a significant boost to DP World and its battered shares, which have tumbled more than 70 percent since they were floated in late 2007. Depending on how it was structured, the buy-in could also give the state-controlled company’s cash-strapped parent a welcome capital injection.

In a statement posted Sunday on the Nasdaq Dubai stock exchange, DP World said its parent “has received an approach from and is engaged in discussions with a regional private equity firm.”

The talks “may or may not result in a transaction regarding a minority stake” in the port operator, said DP World.

The statement did not identify the private equity firm. It also gave few details on the structure of the deal, other than that the stake would come largely, but not exclusively, from free-floating, publicly traded shares.

DP World spokeswoman Sarah Lockie declined to comment further.

State-owned conglomerate Dubai World owns about 80 percent of the port operator, and is the parent of a stable of companies operated by the sheikdom’s government. Its holdings include Nakheel, the heavily indebted property developer famous for building a man-made island in the shape of a palm tree off the Dubai coast.

DP World — the world’s fourth largest port operator — is perhaps best known in the U.S. for its effort to acquire operations at several U.S. ports. The bid sparked a political firestorm in 2006, forcing the company to abandon the plans. The company operates 49 terminals on six continents, including the Middle East’s biggest in Dubai.

Analysts say a private equity buyer would likely need to pay a premium over the current share price of 36 U.S. cents a share. DP World raised $4.96 billion when it initially offered its shares for $1.30 a piece in November 2007.

James Cordahi, a spokesman for one of the Middle East’s largest private equity firms, Dubai-based Abraaj Capital, said the company does not comment on rumor and speculation when asked about suggestions the company was considering a DP World stake.

Arcapita Bank, a Bahraini company active in private equity investment, confirmed that it is not in talks over a stake in DP World, according to a statement attributed to Tim Doyne, the company’s director of corporate communications.

Credit rating agency Standard & Poor’s recently put DP World and five other government-affiliated companies under review for a possible rating downgrade. In doing so, it cited concerns that Dubai World is looking to restructure some $3.5 billion worth of Nakheel debt that comes due later this year. Such a move could in turn affect the health of other sister companies like DP World.

The wording of Sunday’s announcement suggested the private equity talks were being conducted by Dubai World rather than its DP World subsidiary.

Analysts said the deal could be a way for Dubai World to acquire much-needed cash in exchange for a smaller, but still controlling, stake in the port operator.

“They didn’t rule out that Dubai World would sell some of its stake,” said Ian Munro, head of research at financial services provider Mac Capital Advisors in Dubai. “It did not say the entire stock would come from the free float. You can read into that.”

DP World shares gave up strong early gains to end flat at 36 U.S. cents apiece.