Is Ho Ching really paying $10.1B for P&O...or More??

investpro2006 SG

According to the Financial Times and the The Times of London papers today, any company that acquires P&O will have to cover the P&O Employee Pension Fund deficit which stands at approximately Singapore $600million.

Technically this means, taking into account the Pension Deficit, Temaseks purchase price should read as $10.7billion NOT $10.1billion as indicated in our papers. Its interesting how the Straits Times and Business Times conveniently forgot to mention the P&O pension fund deficits in their articles today. Is Temasek afraid that it will be accused for overpaying on their purchase of P&O?

Temasek is offering almost 3.9 times book value. The DPW offer of $9.3billion(3.5times book value) is already classified as being expensive by analyst in London. If P&O is so valuable why has Temasek been sitting on its ass all this while and only decided to jump into the fray when DPW made the offer??why did Temasek not make or negotiate an offer ages ago? short sightedness on the part of its management and CEO? So now we pay more for P&O

Wong Wei Kong in his commentory on the P&O acquisition in the Business Times (12th Jan 2006) ends of by saying 'And both PSA/Temasek and Dubai Ports World (DPW) have deep-some say, unlimited pockets. For the first time perhaps in its acquisition spree, Temasek is up against its equal' The writer is probably forgetting that Dubai Ports unlimited deep pockets results from the rise in the price of oil in the middle east leading to increased wealth in the kingdom. Whereas Temaseks coffers are filled, via the Ministry of Finance, with charging GST on babys milk purchased in Shop N Save.

shade343 SG

What is 600million when you are already paying 10.1billion? Its peanuts. And besides, Temasek Holdings and PSA has been secretly acquiring P&O shares for the past 5 years. I think TH has a deemed interest in 4% of P&O.

soloken SG

Very short-sighted comment. All investment comes with a risk and time factor. At this moment, it is dependable on the final submission adn also depend how the negotiation be dealt with. A PE of 3.9 times is not significantly high if you are looking to secure Singapore as one of the biggest player in port industry for the next ten years, I think it is inevitable that we need to find alternatives, especially when facing stiff competition from shanghai port which had overtaken us in terms of container load. We need to find a niche, and this is one alternative for survival.

robertteh SG

The worst investment decisions made are often made in the name of trying to be no. 1 in any business.

Evaluations will have to be made based on viability, strengths and weaknesses of existing operations and what lowest return we can get from acquisition and sensitivity of any changes to these variables to existing profits from our own operations.

Remembers outside parties may be sharp, calculative and shrewd to want to give a good presentation without telling the whole truths about their existing performance or cans of worms.

Objective decision = good investment decision. Biases and emotions to be no. 1 are not good criteria to go by. How about being more accountable and transparent on the part of Temasek and GIC to avoid same errors as made in past cases of investments in technologies or trades in which our current leaders do not know anything.

KumSioJui SG

According to PSA website, we have abt 6-8 terminals here and operate abt 16 port projects in 11 countries and we are already one of the world leading operators handling 33.09million teu in all our ports in 2004... a record.

P&O has stakes in abt 29 container terminals and abt 100 port operations in 19 countries. Their 2004 revenue is abt 4.6 billion, their 1 yr sales growth is abt 13%.

There are abt 600 known commercial ports in 123 countries and abt 200 shipping lines in the world.

If we get P&O we will handle cargo in abt 100+ ports potentially 20% of the world port handling.

If you think abt dubai now a major port player flushed with oil money with their 4billion barrels oil reserves set to run out by 2016 breathing hard down our necks. With time against them imagine what they would willing to pay if they wanted P&O bad enuf? I think 10 billion to own 20% of the global port operations is not expensive. Or would you rather to give dubai the chance to own 20% of that piece of action.

countdracula SG

doesn’t temasek have a significant equity interest in dp world? then this is a case of right hand fighting the left. they are auctioning against each other….

iveco SG

So P&O-Nedlloyd is coming under Singapore ownership as well? Reminds me of the time NOL bought out APL.

KumSioJui SG

Battle for shipping firm P&O looms

source: http://money.cnn.com/2006/01/11/news/international/po_psa.reut/

SINGAPORE (Reuters) - British ports and ferries firm P&O's shares jumped 6 percent Wednesday as it prepared to open its books to Singapore's PSA, setting the stage for a multibillion-dollar bidding war with Dubai.

Sources close to the process said PSA would start sifting through P&O's books later Wednesday after the British firm said the Singaporean port operator had approached it with a possible offer of £3.5 billion ($6.2 billion).

The possible offer announced Tuesday would trump a £3.33 billion offer by Dubai Ports World, owned by the Gulf Arab emirate's government, which is scouring the globe for opportunities to invest its oil cash.

Shares in P&O, a 165-year-old maritime icon formed at the height of Britain's sea power, jumped more than 6 percent to 498 pence in early trade in London on Wednesday but had fallen to 492.51 pence by midday.

"We advise shareholders to sit tight, as the final offer could quite easily get up to the magical 500 pence per share level," U.K.-based Investec Securities said in a report. "A real contest appears to have emerged."

One source told Reuters in London that PSA, owned by Singapore government investment arm Temasek, was expected to be able to make a firm offer in the next two weeks.

"They're not expecting to find anything problematic (in the books)," the source said.

Global ambitions

A counterbid has been rumored ever since Dubai announced its offer at the end of November, and speculation grew when PSA began to buy shares in P&O. PSA holds 4.1 percent of the British firm.

Like Singapore, Dubai is a relatively small commercial center with global ambitions and hopes P&O will extend its reach in Asia and expand its role as a regional hub.

Should Dubai's bid succeed, it will become the world's No. 3 port operator after Hong Kong's Hutchison Whampoa and Temasek.

"We are 100 percent committed to this transaction. Ours is the only serious offer on the table," Dubai Ports Chairman Sultan Ahmed Bin Sulayem told Reuters in Dubai.

He declined to comment on whether Dubai would raise its offer for P&O, which values the company's stock at 443 pence per share, compared with the 470 pence indicated by the PSA approach.

A bidding war will not be a problem for the two companies, both of which are backed by wealthy governments eager to invest abroad. Analysts said Dubai Ports was unlikely to back down.

"I think they will insist on having it... It's part of their strategy to diversify," said Wadah Al Taha, head of research at the National Bank of Abu Dhabi.
Biggest ports group

Shipping experts say the deal is strategic for both bidders. PSA needs to strengthen its position in India, while Dubai Ports, aiming to become a global player, has also set its sights on the subcontinent.

"PSA is interested because of the P&O ports in India and Australia. They (P&O) are very strong in these two markets," said John Ong, a former PSA senior executive who now runs his own port consulting business, Channels & Trends.

Industry watchers have long expected PSA to make a major acquisition, and a successful bid for P&O would make it the world's biggest ports group.

Temasek is set to receive S$900 million ($551 million) in cash next month from a payout of excess funds by Neptune Orient Lines, a container liner it controls. It spent billions on stakes in Chinese banks last year.

Dubai, part of the United Arab Emirates, is armed with mountains of oil cash. Firms linked to the Dubai government have snapped up assets ranging from Britain's Tusssauds Group to a stake in DaimlerChysler (Research) in the past year.

soloken SG

[quote]Originally posted by KumSioJui:
[b]Battle for shipping firm P&O looms

This will be interesting to watch, I supported PSA to win this deal as it will be beneficial to the Singapore economy as a whole. This is definetely better than spending money on the so called record breaking scuba thingy. Mr. Green

Salman SG

Sales price don't include debts and liabilities. These are seperately mentioned and not lumped together as a sum.

Anyway, great buy. Good for Singapore. I fully support it.

KumSioJui SG

The figures I got from hoovers.

yeah ... but I also believe the arabs won't back down so easily, they have stacks and stacks of oil money to throw I hope we have near that capability also and it's an opportunity for them to move more of their economy away from reliance on oil before their reserves run out. It's going to be a stiff challenge as the stakes are very high, this thing seems like can make or break nations and looks to be the shareholders of P&O will be holding out for the best offer .. this will not be easy.

Salman SG

Those Arabs are not as rich as us.

sbst275 SG

In the 1st place, the 4.1% stake is held by PSA and not directly under TH...

This deal is probably the only one left for PSA to expand

Li Ka Shing SG

Since this is major, and has a bit of strategic significance, I hope some good old politics will come into play. I hope they resist Dubai, like how US resisted chinese CNOOC. They will be more comfortable to choose a westernized, English speaking, Commomwealth member, Singapore.

Uhhhh...maybe not...it's just ports anyways. I dunno.

By the way, book value is not P/E. Book value is assets minus liabilities.

sbst275 SG

Buying P&O is a like the party that gets it wins...

If Dubai gets it, it means it overtakes AP Moller Maersk as No 3 largest port operator, just behind PSA

If PSA get it, it means PSA becomes the world's largest port operator overtaking HPH

robertteh SG

Still remember Singtel lost to Mr. Richard Li in bidding for take over of many Telcos under PCCW ambitious roll out plan to become Asia's biggest Telcom operator.

Unfortunely or fortunately Singtel failed to get the bid because of some political connections of Singtel to the Singapore government. Because of political objection against Singtel's acquistion, Singtel has escaped billions of losses which were sufferred by Richard Li. Singtel was able at a later date to take over many other targetted telcos and achieve a better expansion plan.

We do not know whether the price Dubai is bidding might be too over-inflated due to its ambition to become no. one. If Dubai gets the deal at the highest bid price, is it necessarily a minus or a setback to PSA? If Oei Hong Leong finds that his bid for takeover has been overtaken by his opponents, what does he do? Did he press on to offer higher bid just to be no. 1?

At the end, PSA should still weigh its potential for its own profitability if it wants to outbid Dubai. Because by maintaining its potential, PSA may still get another shot to acquire some others worth the buy and achieve its plan through another venue.

sbst275 SG

Though Dubai is keen to be No 1 esp aft accquiring CSX World Terminal, it actually gave in into NWS's selling of stake of their Hong Kong Terminal to PSA.

Another shot? There isn't anymore other chances, they have paid a high price during the CSX lesson

KumSioJui SG

Should we end up with P&O and combined with what we already have we will have a huge cash cow to milk, by then we dun really need to chase after every deal out there or worry where the next meal is coming for the next 10 years.

If we lose this deal it may mean the reverse, we will have to worry for the next 10 years or more because competition is gonna get stiff and dubai with their new found capability and capacity will nipping at our heels every chance they get. There may or may not be another opportunity down the road like PCCW and Optus but nobody really knows how long you have to wait for it and if it is up for grabs you can be pretty sure everybody will want to bid for it.

I think it could still work, if a bidding war starts TH could bankroll PSA who will only need to sign a note for it. Once they get P&O after a few years running it PSA can have an IPO or REITS and use the proceeds to pay back TH and maybe bankroll further growth.

sbst275 SG

At the end of the day, PSA can no longer rely on Singapore for their main business... Singapore Terminal is already matured and who knows the harm is Westport and PTP doing to us for the next 10 years

Westport snatched CMA CGM away from PSA back in 1996.

anonymouscoward SG

Also, the thread starter does not understand the dynamics of force acquistion. It's the same trick Oei Hong Leong played in NOL. If DPW increase their offer in fear of losing out to Temasek, the increment alone is a significant profit. If DPW choose not to counter, then Temasek gets control; which to Temasek, is a win-win situation.