May 10, 2009 6:34 pm

Abraaj Capital in talks for DP World stake

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Abraaj Capital, the Middle Eastern buy-out firm, is in talks to buy a minority stake in DP World, according to people close to the situation, signalling a long-awaited revival in the moribund regional private equity market as wealthy buyers come off the sidelines.

The private equity group’s approach for a stake of at least 15 per cent of the Dubai government-controlled port operator – one of the jewels in the crown of the city state – comes as the government seeks to raise cash to help reduce its debt pile. But the sale could be as much about building confidence in the port operator’s battered share price.

For cash-rich Abraaj, the move is a chance to invest in one of the region’s most undervalued blue chips and reflects growing confidence that the region has left behind the worst of the crisis.

DP World’s stock price has been in decline since its initial public offering in 2007 of $1.30 a share, falling below 20 cents in February and March after regional bourses mirrored the freefall in global markets.

The stock was suspended last week after leaping by a third to 36 cents, and closed at the same price Sunday.

Dubai World, the government holding company that controls the world’s fourth-largest ports operator, on Sunday said a private equity company had expressed an interest in acquiring a minority stake, largely from the public shares floated on Nasdaq Dubai.

Abraaj, advised by Credit Suisse, declined to comment. Deutsche Bank is advising Dubai World.

But people close to the situation said it was eyeing a stake of more than 15 per cent, which would have a value of about $1bn based on the current share price.

Abraaj raised $2.6bn for its latest buy-out fund in September last year but, until recently, had signalled it was too early to start buying assets.

The private equity house is one of several regional buyers waiting to deploy about $11bn in capital after deal activity declined last year.

The interest from Abraaj could kick off purchases of undervalued assets, especially in listed companies that have seen values slashed amid the market rout.

“Public markets are better valued than private markets, where sellers have yet to adjust their price expectations,” said Imad Ghandour, executive director of Gulf Capital, a private equity firm based in Abu Dhabi.

DP World reported a 48 per cent rise in profits in 2008 at its 49 ports around the world, but warned volumes were declining as global trade slumps, forcing it to halve development plans.

The company remains convinced its presence in the emerging markets of the Middle East, Africa and Asia will provide a springboard for growth as the global economy recovers.

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