Dubai: Government Buys Back Public Shares in DP World

Dubai

The debt-burdened government of Dubai is making the unusual move to regain full ownership of partially privatised state firm DP World, buying back public shares and delisting the company from its local stock exchange.

Dubai is bucking the trend in the region of governments selling stakes in profitable state entities to the public to raise cash and strengthen and diversify their capital markets.

DP World, the world’s fourth-largest port operator with a network of 91 marine and inland cargo terminals, announced February 17 that its parent company, state-owned Port and Free Zone World (PFZW) was offering to purchase the 19.55% of DP World’s shares listed on Nasdaq Dubai for $16.75 a share. That share price is a 29% premium over the closing price of $13 a share from the previous day.

The cost of PFZW buying those outstanding shares is estimated at $2.72 billion. The cash offer is expected to be completed in the third quarter of this year and requires shareholder and regulatory approvals.

This step will make DP World entirely state-owned, some 12 years after the port operator raised $5 billion in an initial public offering and floated 3.8 billion shares on the Dubai International Financial Exchange, the predecessor to Nasdaq Dubai.

DP World explained that the demands of the equity markets for short-term gains increasingly ran counter to the company’s medium- and long-term goals, resulting in its return to private ownership and delisting on Nasdaq Dubai. DP World said its board determined that “the disadvantages of maintaining a public listing outweigh the benefits” and that delisting was in “the best interest of the company.”

PFZW is 100% owned by Dubai World, one of the Dubai government’s state investment vehicles that focuses on transport and logistics, dry docks and maritime, urban development and financial services.

DP World said: “In the context of the planned delisting of DP World, a payment of $5.15 billion is required from PFZW to Dubai World to assist Dubai World in discharging its outstanding obligations to its commercial bank lenders, so that DP World can implement its strategy without any restrictions from Dubai World’s creditors.”