Wave of Interest Follows Ports Bid

By Michael Smith and Steve Pain

A consortium including Goldman Sachs and investment groups from Canada and Singapore is considering a bid for Associated British Ports – sending shares in Britain’s biggest ports group to new highs.

Goldman Sachs yesterday said it was working with partners on a possible bid that analysts said could value the owner of 21 UK ports at more than pounds 2 billion, but there was no certainty an offer would be made. The US investment bank said it had teamed up with Borealis, the investment vehicle of Ontario pension fund OMERS, and GIC Special Investments, the private equity arm of the Government of Singapore Investment Corporation.

Shares in AB Ports, which handles a quarter of Britain’s seaborne trade and owns the Hams Hall distribution complex near Coleshill, rose nearly four per cent.

The stock rallied ten per cent last week on bid speculation and new Government proposals that could allow firms to extract more value from property assets. AB Ports has a large property portfolio, including land used for port operations.

The potential bid follows last year’s $6.8 billion (pounds 3.93 billion) takeover of UK ports firm P&O and a string of mergers and acquisitions in Europe’s ports industry as shipping markets bask in a three-year boom on the back of growth in Chinese demand.

Analysts believe rival bids for AB Ports could emerge.

“Given its number one market position in the UK, strong cashflows, available financial headroom and further potential to exploit the significant property holdings, we believe the assets are attractive to third parties,” Dresdner Kleinwort Wasserstein told clients in a note.

Analysts were split on how much AB Ports would benefit from Budget measures announced last week to put property assets into a tax-saving real estate investment trust (REIT). JP Morgan said AB Ports had sold most of the property it owned that could have fitted into that category.

One source said AB Ports was still working out how much it could benefit from the measures.

Its UK ports including Hull and Plymouth. It also has four port operations in the United States. The firm said it had not received a bid proposal but noted Goldman Sachs’ announcement.

“The consortium’s considerations are at a preliminary stage, and there can be no assurance that any offer will be made,” Goldman Sachs said.

JP Morgan said a possible 740p bid would give AB Ports an enterprise value of 13.7 times its earnings before interest, tax, depreciation and amortisation, compared with 13.4 for P&O.

Panmure Gordon analysts said AB Ports could be worth more to investors as a quoted company if it could take advantage of the REIT proposals, which are expected to come into force in January.

Examples of consolidation in Europe’s ports industry include

Gulf state-backed Dubai Ports World completed its $6.8 billion takeover of Britain’s P&O this month following a bidding war with rival Singaporean port operator PSA International

Australian investment fund Babcock & Brown Infrastructure won control of UK ports operator PD Ports in January after bidding about pounds 337 million

Britain’s Peel Ports paid pounds 771 million to take over British ports operator Mersey Docks & Harbour Co in June 2005

Denmark’s Moeller-Maersk last August completed its $3 billion (pounds 1.73 billion) takeover of Dutch rival P&O Nedlloyd, which included a 25 per cent stake held by Britain’s P&O

TUI, Europe’s biggest tourism firm, completed its $2 billion (pounds 1.15 billion) takeover of container shipper CP Ships in December