Citi buys 75% of DP World’s Australian ports

Citi Infrastructure Investors has acquired a 75% stake in DP World Australia, which operates five container ports, valued at A$1.5bn. Citi will fund the deal, which is set to close in the first half of 2011, with A$530m of debt and the balance in equity.

DP World, owned by Dubai investment company Dubai World, has sold a majority stake in its Australian unit to Citi Infrastructure Investors (CII), an infrastructure fund, it said in a statement.
The deal will see CII, together with an unnamed partner, purchase a 75 percent stake in DP World Australia for A$1.5 billion (€1.1 billion; $1.5 billion). DP World operates five container terminals across Australia in Adelaide, Brisbane, Fremantle, Melbourne and Sydney. The five ports handled about 50 percent of the Australian container market in 2009, or 3.5 million 20-foot equivalent units a year.
CII partner Colin Campbell told Infrastructure Investor during a conference call on the deal that CII will “capitalise DP World Australia with an A$530 million term loan with the balance of the deal to be paid in equity”. He did not however, disclose the identity of CII’s co-investment partner – nor the amounts each will contribute to the deal – adding only that it was one of the fund’s major LPs.
DP World chairman Sultan Ahmed Bin Sulayem and chief executive Mohammed Sharaf told reporters that of the A$1.5 billion purchase price, roughly A$1 billion corresponds to the 75 percent stake with the remainder including the recapitalisation of the company and loans to be paid from DP World Australia to DP World. They added that the deal with CII will yield profits in excess of $300 million in relation to the original asset acquisition prices for the five ports.
The senior executives said that proceeds from the sale will be used to meet DP World’s debt commitments, including $3 billion of debt which matures in 2012. DP World has a total of $5.9 billion of debt.  Prior to this transaction, it had $2.7 billion of cash reserves on its balance sheet.
DP World Australia generated equity-adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of A$96 million in 2009. The transaction values the firm at an enterprise value of A$1.8 billion with DP World to continue owning a 25 percent stake in its Australian unit. In addition, DP World will continue to manage the Australian ports under its agreement with CII.
DP World is present in Africa, Asia, Latin America and the Middle East. Despite being part of Dubai World, which encountered problems repaying its debt last year causing turmoil in the global financial markets, it is largely seen as fiscally sound.
CII is being advised by HSBC and UBS on the deal with Deutsche Bank and Citigroup Global Market counselling DP World.