DP World IPO values company at $21.6b

The firm's owner, the government-owned Port and Free Zone World (P&FZ World), will sell 2.822 billion shares, or 17 per cent of DP World's equity, at between $1 and $1.30 per share. The offering also includes an option, known as a greenshoe, to sell another three per cent, or 498 million shares, to meet demand.

The final price of the shares will be established through a bidding process with institutional investors, which will set a market price before listing. The final price, to be paid by both retail and institutional investors, will be announced on or around November 21.

"The indicative price range reflects DP World's strong reputation internationally and confidence in its future. DP World is a long-term business and pre-marketing has indicated that potential investors recognise that and are interested in a correspondingly medium to long-term investment in our shares," DP World executive vice-chairman and group CEO of R&FZ World, Jamal Majid bin Thaniah, said in a statement.

If the shares were to sell at the top-end of the indicative price range, a company valuation of $21.6 billion would be twice that some analysts have predicted. For example, Drewry Shipping, a maritime advisory firm, had expected the company to raise about $3.5 billion by selling up to 30 per cent of its shares.

A valuation topping $21 billion would value the company at between 15 times and 19.4 times forecast 2008 earnings before interest, tax, depreciation and amortisation (EBITDA), Justin Anstee, Merrill Lynch & Co, head of infrastructure, said after the DP World briefing.

Merrill Lynch International, Deutsche Bank, Millenium Finance Corporation and Shuua Capital are acting as joint global co-ordinators and joint lead managers to the listing. The receiving banks for the UAE retail offer are Mashreq Bank, Emirates Bank, Abu Dhabi Commercial bank and First Gulf Bank. Mashreq Bank is the lead-receiving bank.

The offer became available to retail investor applications from yesterday. Applications will be accepted by receiving banks until 12 noon on 15 November.

Among DP World's strengths are its size and geographically diversified portfolio of terminals. According to the prospectus, this gives "a competitive advantage over smaller and more concentrated operators because of the relatively high barriers to entry that characterise the container terminal industry".

The company has 42 terminals in 22 countries, many of which are located in the Middle East, India and China, from where much of the company's future growth is expected to be concentrated.

Chairman of Dubai World and DP World, Sultan Ahmed bin Sulayem, said he expects the company's solid performance "to continue into the future, given the continued increase in volumes flowing through the supply chain and the constraints on the ports industry's ability to meet demand globally."

In 2006, DP World's volumes grew at about 18 per cent compared with broader market growth of about 11 per cent.

The fact that DP World has decided to list on the DIFX is a boon for the fledgling stock exchange as it seeks to boost its liquidity. Yet there are risks, as it notes in its prospectus, "related to listing on a newly established and largely untested exchange".

However, DP World's "anchor" listing is expected to encourage other companies to list on the exchange in the near future. After the DP World briefing, Per Larsson, CEO of Borse Dubai, the holding company for DIFX, said there is "healthy pipeline" of companies waiting to be listed.