Dubai World suspends ISS sale to wait for better price

Two US groups are believed to have pulled out of talks

Dubai World has called a halt to the disposal of one of its most valuable assets, the port and shipping business Inchcape Shipping Services (ISS). ISS was bought by Istithmar World, part of the Dubai World conglomerate, in a US$285 million (Dh1.04 billion) deal in 2006. Before the sale process stalled, analysts put a possible sale price as high as $800m in a healthy auction among the world's leading private equity groups.

"I think the sale process will be suspended for a period of time until market conditions improve," said a person close to the sale process, who asked not to be identified. Two US groups, General Atlantic and Carlyle Group, are believed to have pulled out of talks, while interest from the UK companies Cinven and CVC Capital Partners has also waned. "The company and its advisers have determined it's not the best time to sell ISS. There is a disposal programme that gives eight years to get the best price. Why let it go now? It is a blue-riband business and they will not let it go until they can get the best possible price. It's a tough time to get high prices, especially in the shipping business," the source said.

The move follows reports of an investigation by the US department of justice (DoJ) into contracts involving the US Navy. Dubai World declined to comment on the matter and the DoJ was unavailable. Recent reports said potential buyers had learnt during the due diligence process that the US authorities were investigating ISS's contract to service the US Fifth Fleet, which is based in Bahrain. ISS is headquartered in London and has operations in Kuwait, Qatar, Oman and the UAE.

The sale of assets by Dubai World is complementary to the process of financial restructuring of $23.5bn of debt, which last month received the approval of the group's biggest creditors. The person close to the disposal programme said a delay in selling ISS would not have an impact on other assets that Dubai World had earmarked for possible sale. It has already sold an equity stake in the Indian airline SpiceJet for an estimated $35m.

Istithmar also has interests in businesses such as US publishing and financial services, including a holding in the banking group Standard Chartered. "Istithmar is a functioning investment management business, so it's natural that it will consider disposals when the price is right. The whole disposal programme has not been called off because of ISS. There are lots of smaller assets that can go," the source said.

However, analysts regarded ISS as the most marketable of Dubai World's assets. Under Istithmar ownership it more than doubled profits between 2006 and last year, when it made $62m. @Email:[e-mail]