DUBAI (Reuters) - Dubai-based ports operator DP World moved to cut its debts with the sale of 75 percent of its Australian operations to private equity firm Citi Infrastructure Investors (CII) for $1.5 billion.
DP World -- considered one of the more profitable units of debt-laden Dubai World -- said on last week it will keep 25 percent of DP World Australia and will also retain earnings by continuing to manage the operations.
DP World Chief Executive Mohammed Sharaf said all the proceeds will go to the company, which is keen to reduce its net debt, and he had no plans to sell other assets.
"This wasn't done because we went in the market looking for partners, they approached us," he said on a conference call.
"This is part of our strategy of continued growth in emerging markets without increasing overall leverage in our business."
The deal with CII, Citi 's infrastructure fund, values DP World Australia at $1.82 billion.
DP World shares rose 3.2 percent on Nasdaq Dubai, hitting a two-year high.
The firm had considered an initial public offering for the Australian business but opted for a strategic investor because the valuations were better, chief financial officer Yuvraj Narayan said.
"It's going to be accretive," he said of the deal, which is slated to close towards the end of the first quarter in 2011.
"What we lose in EBITDA, we will get back as a result of management fees as well as our reduction in net interest costs. We see this as a good transaction."
The ports operator, which was excluded from parent company Dubai World's massive debt restructuring, had $8.04 billion in outstanding debt at the end of June 2010, according to a bond prospectus it updated in November.
It plans to seek a dual listing in London early next year.
"The fact it has been able to sell assets in the current environment should be seen as a positive," said Shehzad Janab, chief investment officer at Daman Investments.
"DP World is making money and is a play on regional and global growth and I would expect it to continue to be ring-fenced from Dubai assets sales until prices improve and I don't see that happening any time soon."
DP World secures top accreditation
Global port operator DP World has achieved the prestigious Chartered Institute of Purchasing & Supply (CIPS) Organisation Certification for Procurement Excellence.
The CIPS Organisation Certification is the most recognised international standard for an organisation’s procurement and supply chain policies, procedures and strategies. To date, only 90 companies worldwide have attained accreditation, with quality-controlled CIPS annual audits. DP World is the first maritime terminal operator to achieve accreditation.
The certification followed intensive audits by an independent CIPS Audit team from London.
“Efficiencies in procurement and cost management contribute directly to the balance sheet of our company. At DP World Head Office we have gone the extra mile to ensure that our procurement policies and practices are governed by an absolutely ethical framework, underpinning and safeguarding the interests of the company and its stakeholders,” said Iqbal Khoory, senior vice president – Procurement, DP World.
“DP World has demonstrated that it has sound procurement policies, processes and procedures in place. This not only increases work efficiency, but also further enhances DP World’s credibility with its suppliers and stakeholders,” added David Noble, chief executive, CIPS.