Dubai Firm to Sell U.S. Port Operations
Friday, March 10, 2006
A United Arab Emirates-based maritime company at the center of a furious controversy over port security bowed to pressure from Congress yesterday and announced that it will sell off its U.S. operations to an American owner.
The announcement, issued by Dubai Ports World Chief Operating Officer Edward H. Bilkey, came hours after House and Senate GOP leaders bluntly told President Bush that Congress would kill the U.S. portions of the company's $6.8 billion acquisition of London-based Peninsular and Oriental Steam Navigation Co. (P&O), which has operations at six major U.S. ports, including New York and Baltimore.
The company's decision climaxed a three-week furor that pitted both Republicans and Democrats in Congress against Bush on a volatile national security issue in a midterm-election year. Fueled by fear of terrorism in a post-Sept. 11 world, opposition to the port deal mushroomed to the point at which even Bush's veto threat proved ineffective and, if anything, further aggravated even GOP allies.
The White House praised the UAE-based company for its decision and reaffirmed the "strong relationship" between the two nations. "This decision provides a way forward and will allow us to continue working on other issues," White House press secretary Scott McClellan said in an interview.
Although the demise of the U.S. port deal is sure to leave badly bruised feelings in the UAE, of which Dubai is a part, analysts predicted that the United States will be able to preserve its extensive security and economic ties with the tiny country, given the strong mutual interests at stake. The bigger problem, they said, will be the new damage done to the U.S. image in the Muslim world.
Even before the deal fell through, Arab media had been portraying U.S. opposition as an anti-Arab slur, contrasting that resistance to the acceptance generally accorded in the United States to investments from Asian and European entities.
"This can only make the already-damaged image worse," said Youssef M. Ibrahim, managing director of Dubai-based Strategic Energy Investment Group. "The problem is, for four or five years, we haven't found a way to repair that damaged image."
It is not clear which American company is willing to buy DP World's U.S. operations. About 75 percent of containers that enter U.S. ports go through terminals that are operated by foreign-owned firms.
Officials at Seattle-based SSA Marine, the largest U.S.-owned terminal operator, said they have not been contacted. Some potential bidders may seek to join forces with firms that already have operations at U.S. ports. But the process is in the early stages, and DP World appears to be determined to avoid a fire sale.
One potential private-equity buyer is Washington's Carlyle Group, which bought the U.S. container-shipping business of CSX Corp. in 2002 for $300 million, selling it two years later for $650 million. Also, the Dubai government has been an investor in Carlyle's investment funds and put $100 million into its latest, $7.85 billion buyout fund.
A source at Carlyle, however, said the firm will probably not be interested in P&O's port operations, given the political scrutiny such a deal would invite.
Another potential private-equity buyer is the Blackstone Group of New York. Though not ruling out an offer for the business, a source at the firm said it is too early to tell whether P&O's U.S. operations are even worth seeking.