By Arif Sharif and Will McSheehy
Nov. 4 (Bloomberg) -- DP World Ltd., the Dubai-owned ports company with terminals from the U.K. to China, began a share sale to raise as much as $4.32 billion in what may be the Middle East's biggest initial public offering.
Investors can place orders at $1 to $1.30 apiece in the global offering, in which 2.822 billion shares, or 17 percent of its equity, will be available, it said in a statement in Dubai today. DP World may sell another 498 million shares, or 3 percent, if bids exceed the shares on offer.
``This indicative price range reflects DP World's strong reputation internationally and confidence in its future,'' Jamal Majid bin Thaniah, executive vice-chairman, said in the statement.
DP World, the fourth-biggest container port company, said Oct. 21 it will sell about 20 percent of its stock to repay $3.5 billion of Islamic bonds, provide cash to the government and spur interest in the Dubai International Financial Exchange. The IPO follows Dubai's purchase of stakes in Nasdaq Stock Market Inc. and London Stock Exchange Group Plc as it vies with Qatar and Bahrain to be the Gulf's financial center.
The state-owned Dubai Exchange will be renamed following Borse Dubai's September deal with the U.S. company. DP World shares are scheduled to list on the bourse Nov. 26. A quarter of the shares on offer in the IPO will be used to repay holders of its Islamic bond.
May Exceed Telecom
The IPO is open to companies and resident citizens of six Persian Gulf countries, foreigners living in the United Arab Emirates and institutional investors globally. The offering for retail investors closes Nov. 15, and on Nov. 20, for institutional investors. The offer price will be announced on Nov. 21
A sale of 3.32 billion shares at the top end of the price range would value the company at $21.6 billion. The price range of $1 to $1.3 a share implies an enterprise value-to-estimated 2008 earnings before interest, taxes, depreciation and amortization, or Ebitda, of 15 to 19.4, Justin Anstee, a managing director at Merrill Lynch International, told reporters in Dubai today.
``The valuations are more like what we expected,'' said Deon Vernooy, head of Emirates Bank International PJSC's asset management unit. ``We were a little concerned when some of the research earlier valued the company at $18 billion to $23 billion.'' Demand for the IPO, though, will be strong as DP World brings a ``fantastic asset base'' to the market, Vernooy said.
Saudi Telecom
The IPO may surpass the Middle East's biggest initial offering yet, Saudi Telecom Co.'s 2003 offering that raised $4.1 billion. That sale was open only to Saudi investors.
Initial public offerings in the six Gulf Arab countries raised $5.9 billion in the first nine months of 2007, Abu Dhabi- based private equity firm Gulf Capital said in a report last month. The 26 IPOs this year on average received more than six times the amount of bids than shares on offer.
Deutsche Bank AG, Merrill Lynch, Shuaa Capital PSC and Dubai Islamic Bank PJSC's Millennium Finance Corp. unit are managing the share sale for DP World.
DP World, which operates 42 container terminals across 22 countries, is forecast to report a 37 percent increase in operating profit in 2007 to $964 million. Operating profit will rise at a compound rate of 17 percent over the next three years to reach $1.54 billion in 2010, according to the average forecasts of the four IPO sale managers.
``DP World will distribute at least 20 percent of its attributable profit to shareholders as dividend,'' Yuvraj Narayan, DP World's chief financial officer, told reporters.
Container volumes handled by DP World grew 18.1 percent in 2006 to 36.8 million twenty-foot equivalent units, compared with overall market growth of 10.8 percent, Mohammad Sharaf, DP World's chief executive officer told the conference.
DP World will exercise its option of selling an additional 3 percent of its shares if demand exceeds the shares on offer and the price advances after trading. It will use surplus bids to buy back shares if the share price falls after listing.
Port Stocks
The company, which began operations some 35 years ago with one port, acquired Peninsular & Oriental Steam Navigation Co. for $6.8 billion last year. It has a ``strong'' pipeline of new projects that is expected to nearly double capacity to around 90 million TEUs in 10 years, it said in a statement. That will help it catch up with rivals like Hong Kong's Hutchison Port Holdings Ltd. and Singapore's PSA International Pte.
The company's listing will be the first of a global, stand- alone port operator, although two smaller port companies began trading earlier this month.
Hamburger Hafen & Logistik AG, owner of Germany's biggest port, jumped 17 percent on its first trading day Nov. 2 after an IPO that valued it at $5.3 billion. Its offer price indicated an enterprise value-to-Ebitda of 16.3.
Novorossiysk Commercial Sea Port, Russia's largest commercial seaport, said Nov. 2 it sold global depositary receipts at $19.20 apiece, giving it a market value of $4.9 billion. That offer price was at an enterprise value-to-Ebitda of 14.8, bankers said today.
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