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January 6, 2006 2:38 pm

P&O investors can hold on to ferry discount

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A generous deal has been offered to investors who hold B preferred shares in P&O, popular shares that offer steep discounts on the cost of using the company’s ferries.

Investors who hold these shares have two options, according to a proposal laid out by DB World, the Dubai-based port operator set to acquire the ferry operator.

The first option is to trade them in and, in return, receive £1.20 for each share. On Thursday P&O B preferred shares were 110p.

The second option, which looks more enticing for shareholders who enjoy the discount perks, is to swap each share for £1 in cash plus a concessionary unit that continues to offer the same discount on the cost of journeys.

As the scheme stood last year, holding 600 B shares entitled investors to a 50 per cent discount on most of P&O’s routes. Holding 300 shares made them eligible for a
discount of 25 per cent. Also, shareholders earned a guaranteed 5.5 per cent return on the P&O preferred stock each year.

Under the terms of the proposals, DB World has reserved the right to cancel its new concessionary fare scheme at any time. If the group opts to do so, investors will be able to trade in each concessionary unit for 20 pence.

As the owners of these concessionary units will no longer be stockholders in P&O, they will not receive a dividend. These units will not be listed on an exchange but they can be transferred.

P&O, which runs ferries across the Channel as well as to Bilbao, Spain, introduced these shareholder discounts in 1987 following its acquisition of rival Townsend Thoresen. When they were introduced they were wildly popular, but these days many travellers are less enthusiastic about holding such a discount entitlement as they can often find cheaper prices on ferries by surfing the internet. The Dubai company has an interest in maintaining its database of B shareholders as they are usually repeat customers.

DB World announced a recommended £3.33bn cash offer for the UK company on November 29. But since then PSA, a Singapore company and the world’s second biggest container terminal operator, and its parent, the investment company Temasek Holdings, have built a stake in P&O. Temasek now holds slightly more than 4 per cent of P&O’s shares and could launch a competing bid.

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