Assuming no last-minute hitches, by the end of this month the global ports operator DP World will be listed on the London Stock Exchange in addition to Nasdaq Dubai.
The next steps on the road to the LSE
Last Updated: May 02, 2011
Q&A: Everything you always wanted to know about the proposed DP World listing in London. Read article
The Dubai company will be the first UAE-incorporated entity to have its shares traded on an overseas market, providing an opportunity for international financiers to demonstrate what they think of Dubai as an investment hub.
It is also a big global step forward for a company that has always been central to the emirate's development.
Dubai's explosive economic growth had its origins in the decision in the late 1970s to expand port facilities at Mina Rashid and Jebel Ali, from which DP World subsequently grew.
In 2006, it took the world stage with the US$7 billion (Dh25.71bn) takeover of the British ports and shipping business P&O.
But when trading does finally open in London, it will be the culmination of a debate that has been going on inside the company for nearly five years, and a victory for what some insiders call the "internationalists".
As DP World prepared for an initial public offering (IPO) in 2007, there were two strands of strategic thinking inside the company.
There were those who wanted it to focus solely on the Dubai market (then called the Dubai International Financial Exchange). But there were others who argued the case then for a dual listing in the UAE and London.
"There has always been background noise that DPW was a jewel in the crown and it shouldn't pass into other hands," one source close to the company says on condition of anonymity. "But that was never a serious objection."
The ultimate owner, the government-related conglomerate Dubai World, still holds some 80 per cent of DP World's equity, easily enough to block any potential sale of the "crown jewels". At least for the present, it has no plans to sell any of that stake. That could change, depending on the post-listing share price performance.
Mohammed Sharaf, the chief executive, says it is not DP World's job to try to second-guess the intentions of the owner. "We are not in a position to speak on behalf of the majority shareholder," he says. "They will take a view on the value of the stake when it's appropriate."
Despite the well-documented financial problems of its owner, DP World does not need cash itself, and no new money is being raised in the London listing. DP World has net cash of $4bn and authorisation to borrow more if needed.
DP World has also shown it will take advantage of opportunities to sell assets, with the disposal of its Australian business last year for $1.5bn.
Although the London listing is not strictly contingent on market conditions, the move comes at a good time for DP World. In March, when it revealed profits were up 22 per cent at $451 million, Mr Sharaf said DP World was going to have another good year and could even benefit from the turmoil in some parts of the Arab world. The business, with no operations in Japan, was not affected by the earthquake and tsunami disaster there.
The ratings agencies Moody's Investors Service and Fitch have both upgraded DP World since the results were announced.
"The only thing that has changed since the results announcement is that our shares have improved in value, which is encouraging," says Mr Sharaf. "All is on course."
There will be a further trading statement at the annual meeting on May 11.
Will the London listing lead to an increase in the share price? "That's up to the market, of course, but we feel we are still undervalued," says Mr Sharaf. "The word we've heard from the investment community is that the London listing will give us exposure to fresh funds and new investors."
In other respects, DP World already meets London Stock Exchange investment criteria. It has always been run along international lines of corporate governance, with a strong network of non-executive committees setting audit, remuneration and accountability standards.
Leading the listing as chairman of DP World is Sultan Ahmed bin Sulayem, who has been involved in the ports business in Dubai since the earliest days. He stepped down from the chairmanship of Dubai World last year but remains committed to DP World. "This is his baby," says an insider.
