Controversy over the takeover of US container ports by Dubai Ports World spread to the British High Court on Monday when a US company argued against the £3.92bn deal.
Eller & Co, which co-owns a container terminal in Miami with P&O, the British container ports and ferries operator that is the subject of DP World’s takeover bid, told the court it could suffer “very substantial” losses if the deal were to proceed.
Eller asked the court to reject proposals that would implement the transaction, which members of both the US Democratic and Republican parties oppose on the grounds of national security.
The High Court hearing, expected to be a formality lasting only minutes, will now take at least another day. Two other objectors, individual shareholders, were to be heard on Tuesday.
The delay is the first time the controversy in the US over the takeover – which would affect five container terminals in the US and some other cargo-handling business – has affected the overall progress of the deal, which was approved by P&O shareholders on February 13.
However, both P&O and DP World are thought to be confident the deal can still be completed on March 2, as planned.
In court, lawyers for Eller told Mr Justice Warren the deal would mean the loss of business worth $115m (£65m, €97m) and affect more than 1,500 jobs at the port. “My clients are fighting for their lives in the port of Miami, and the losses they will suffer are very substantial indeed,” said Paul Downes, Eller’s barrister.
Earlier, lawyers for P&O said it was not correct that the deal would automatically be blocked in the US if a fresh review by the Committee on Foreign Investment in the US (Cfius) still had security concerns. “There is at present no legal mechanism by which the transaction can be blocked other than by order of the president,” said Martin Moore. Rather, he said, such an outcome would raise “a range” of possibilities – with divestment of the US assets being a “last resort”.
In the US, DP World has submitted its acquisition of the port terminals to a 45-day investigation, which may give the White House time to defuse tensions over the deal in Congress.
But questions have been raised about the way the US vets foreign takeovers of US assets, and why some deals, but not others, are subject to intensive investigations by Cfius.
Administration officials last week defended themselves against charges that the Dubai deal should have been subject to a 45-day investigation from the outset, saying it had unofficially been vetted for 90 days.
The extended investigation that DP World will be subject to is a rare occurrence, according to a congressional report on Cfius last September that found only eight such investigations had taken place between 1997 and 2004, when 470 deals were investigated. Some of those probes have been high-profile, including IBM’s sale last year of its personal computer business to Lenovo, a Chinese company.
Toshiba’s acquisition of Westinghouse, the UK-owned nuclear company, is expected to be subject to a full 45-day probe, and Check Point Software, an Israeli company, said this month that its pending takeover of Sourcefire, a software company, was being reviewed for 45 days.
One Washington attorney who works on Cfius cases said the only remaining threat to the DP World deal from legislators in Washington would be if a law was passed that gave Congress final say on the deal. That, in turn, could have wider ramifications for deals that are reviewed by Cfius in the future.
New York Senator Hillary Clinton and other critics have argued that the White House should have subjected DP World to a full 45-day review from the outset because of the “Byrd amendment”, which forces Cfius to investigate fully any deal if the acquiring company is controlled by a foreign government and “could affect” national security.
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