DUBAI: DP World, the port management arm of indebted state conglomerate Dubai World, sold the bulk of its Australian businesses to a Citi investment fund Wednesday for $1.5 billion.
Unloading the stake will help the sea cargo handler pay down debt and retain a foothold in Australia while it focuses on emerging markets that have fueled much of its growth.
Under the terms of the deal, DP World will keep a 25 percent stake and continue to manage the ports in Brisbane, Sydney, Melbourne, Adelaide and Fremantle.
It is selling the remaining 75 percent in the Australian operations to Citi Infrastructure Investors, a private equity division of the New York-based bank.
DP World CEO Mohammed Sharaf told reporters it was not part of a broader effort to dismantle the company’s globe-stretching operations.
"We’re not in a selling spree out there. We’re talking about bringing in strategic partners," he said. "They approached us."
DP World is one of Dubai’s more profitable state-linked companies. It ranks as the world’s fourth largest port operator, with business at 50 cargo terminals on six continents, including the Mideast’s largest in Dubai.
It pulled in $219.2 million in profit in the first half of this year.
The company is part of the city-state’s struggling Dubai World conglomerate, but was exempted from its parent’s $24.9 billion debt restructuring effort.
DP World said it expects to retain its existing management and staff in Australia. It employs about 2,100 people throughout the country, according to a corporate website.
The $1.5 billion it expects to generate includes the repayment of debts held by the Australian division.
DP World has had a presence in Australia since 2005, when it took over operations in Adelaide following the acquisition of U.S. railroad operator CSX Corp.’s international port business.
It gained operational control of the other four ports through its buyout of Britain’s Peninsular and Oriental Steam Navigation Co. the following year.
The agreements that give DP World the right to manage the five ports run for an average of more than two decades, following recent deals to renew its concessions at Adelaide, Brisbane and Sydney, according to the company.
Yuvraj Narayan, DP World’s chief financial officer, said all proceeds from the Citi sale will go toward paying down the company’s debt.
Executives expect the deal to close toward the end of the first quarter next year.
Banks agreed to reschedule around 14.4 billion dollars of DP’s 24.9 billion dollars of debt debts over five and eight years. The deal averted a distress sale of its wide range of foreign assets.
On Monday, the newly appointed chairman of Dubai World, Sheikh Ahmed bin Saeed al-Maktoum, renewed the company’s pledge to meet its debt obligations.
DP World Australia operates container terminals in Adelaide, Brisbane, Fremantle, Melbourne, and Sydney.
It has a capacity to handle in excess of 3.5 million TEU (twenty-foot equivalent unit) per annum, approximately 50 percent of the total Australian container market, the statement said.
In 2009, DP World Australia generated equity-adjusted earnings of 96 million Australian dollars, before deducting interests, tax, depreciation and amortization.
