The Gulf-based Dubai Ports World is all set to buy out the 165-year old port operator P&O Ports for $6.8 billion even as the Singapore-based port heavyweight PSA International is out of the fray for acquiring the UK ports group.
If the deal goes through, DP World will have direct control of six Indian ports including Nhava Sheva International Container Terminal at Navi Mumbai, Chennai Container Terminal, Mundra International Container Terminal and Kulpi Port in West Bengal.
DP World had originally offered to pay $5.69 billion but revised it to $6.8 billion following a counter offer made by PSA. P&O has agreed to the terms of an increased recommended cash offer to be implemented by scheme of arrangement.
DP World had already bagged the build, operate and transfer project for developing international container transhipment terminal at Vallarpadam (Kerala) and operating Visaka Container Terminal in association with Mumbai-based JM Baxi in Visakhapatnam Port.
"Now DP World will have direct control over six terminals, of which four are operating in the country's major ports. This will create a clear monopoly for the 165 year-old P&O Ports," industry analysts said.
They pointed out that since the P&O Ports-operated terminals in Pakistan (Port Qasim) and Sri Lanka (Colombo) would also come under DP World, it would help the acquirer control Indian trade via transhipment of cargo.
"The P&O directors have withdrawn their recommendation of the offer by PSA which was announced on January 26 and unanimously recommend that P&O stockholders vote in favour of the revised proposals at the meetings which are now scheduled to take place on February 13," a DP World statement said.
According to port sector analysts, the acquisition would give economies of scale for DP World, adding, "At the same time this will pose dangers of monopoly."
"However, the government can effectively control the activities at major ports with the help of regulator Tariff Authority for Major Ports. The good thing is that DP World is not shipping lines so that they will not make these ports into a captive port," they pointed out.
Meanwhile, the ministry of shipping is planning to seek legal advice in the backdrop of the merger of the two port heavyweights."We have to look in to each concession agreements signed between these ports and the government separately. The government will have to examine the clause to check the monopoly. The picture is not still clear about the transfer of assets from P&O Ports to DP World," Ajay Bhalla, joint secretary (ports), ministry of shipping, told Business Standard.