DP World Shifts from Port Operator to Logistics Provider, Delists from Nasdaq Dubai
Nasdaq Dubai is sure to witness a hard blow in the upcoming times as the world’s largest port operator, DP World has announced delisting from the Dubai-based stock exchange. The statement released by the firm lists that the parent company, Port and Free Zone World will purchase the DP World’s 19.55 percent shares, which are traded for $16.75 a share. The shares reflected a 29 percent premium on closing price of $13 per share on Feb 16.
With this shift to private ownership, DP World would be able to focus on its medium-to-long-term strategy of moving from being a global port operator to an infrastructure-led end-to-end logistics provider. As per the company executives, the firm’s public trading is ultimately too beholden to short-term returns.
Currently, the market value of DP World is almost $10 billion and the whole exchange is worth over $130 billion.
In the statement released on Feb 17, the Group Chief Financial, Strategy and Business Officer of DP World – Yuvraj Narayan said, “Delisting from Nasdaq Dubai is in the best interest of the company, enabling it to execute its medium to long-term strategy … In contrast, public markets typically hold a short-term view. As a result of this gap, the DP World strategy is not fully appreciated by the equity markets, and consequently is not reflected in the company’s share price performance.”
Reports claim that the acquisition will be funded via debt provided by Citi and Deutsche Bank. As per the Group Chairman and CEO Sultan Ahmed bin Sulayem, the ports and logistics industry is in the midst of a major transition with the “vertical integration of several competitors”.
The proposed transition comes as the emirate struggles to steer itself out of a five-year economic slowdown initiated by the drop in oil prices, which started in 2014. Based on the 2019 claims made by credit rating agency – Fitch, Dubai and its state-related entities might plan to restructure a chunk of $23bn in loans maturing through 2021.
Even though the delisting from Nasdaq Dubai would see DP World take on an additional net debt of $8.1bn, the port operator expects to receive an investment grade credit rating from Fitch. Post the announcement of DP World, the firm’s stock increased 10 percent to $14.30 in morning trade in the Middle East.
On the other hand, Qatar index hiked 0.3 percent. Ahead of earnings announcement, an energy shipping and transport firm of Qatar – Naqilat surged four percent. The Abu Dhabi index rose by 0.3 percent.
Sources claim that the departure of DP World will lead to a huge disparity from the other two UAE indexes. In such circumstances, it remains to be seen how the Dubai index will make up for the losses.
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