DP World acquires Jebel Ali Free Zone, subs for $2.6b; Delists from LSE

|By TAP Staff|

JAFZ, EZW’s primary business unit representing 97 per cent of revenue and operating profit for the year ended 31 December 2013, is a 57 square kilometre modern commercial and industrial logistics park adjacent to DP World’s flagship Jebel Ali port in Dubai. The free zone is an integral component of the supply chain for DP World’s customers at the Jebel Ali port.

DP World intends to fund the consideration for the proposed acquisition, its related costs and expenses, and the ongoing operations of the enlarged DP World from existing cash resources and existing committed conventional and murabaha term loan and revolving facilities.

The existing US$650,000,000 trust certificates issued by JAFZ Sukuk (2019) Limited due in 2019 and JAFZ’s Syndicated Islamic Facility, will remain in place following completion, with DP World retaining flexibility to explore financing options.

For the year ended 31 December 2013, EZW generated revenue of US$430 million, EBITDA of US$348 million and pro-forma ]profit before tax of US$221 million. As at 30 June 2014, EZW had gross assets of US$3.7 billion on a pro forma basis. The EZW Group’s EBITDA margins have exceeded 80 per cent for the year ended 31 December 2013 and for the six months ended 30 June 2014. EZW financial information has been converted from AED to US$ at an exchange rate of AED3.6725 = US$1.00 being the average prevailing rate for the year ended 31 December 2013.

Owing to the common ownership by PFZW of both the entire ordinary share capital of EZW and 80.45 per cent of the ordinary share capital of DP World, the proposed acquisition constitutes a related party transaction. As a result of the size of the transaction, it is also a Class 1 transaction for the purposes of the UK Listing Rules, and therefore requires the approval of DP World’s independent shareholders.

Accordingly, DP World is required to obtain prior approval from its shareholders pursuant to the UK Listing Rules. An Extraordinary General Meeting will be held on 18 December 2014, when a shareholder resolution will be proposed, authorising the Board to proceed with the acquisition (Acquisition Resolution).

Conditional upon the Acquisition Resolution receiving independent shareholder approval at theExtraordinary General Meeting, it is anticipated that the transaction will be completed during Q2 2015.

In addition, DP World is separately seeking approval from its shareholders to delist DP World’s shares from the London Stock Exchange (LSE) (the Delisting). DP World will maintain its NASDAQ Dubai listing.

A key driver for obtaining the London listing in 2011 was to allow investors, who at that time were unable to invest in DP World through NASDAQ Dubai, access to DP World through an alternative stock exchange.

However, having monitored the situation closely, the directors of DP World (Directors) believe that a significantly higher number of international investors are able to invest in shares listed on NASDAQ Dubai and as at 30 September 2014, approximately 99 per cent of DP World’s shares were held by individuals and institutions investing through the NASDAQ Dubai listing, with less than 1 per cent being held in depository interest form through the LSE. In addition, during the period from 2 September 2014 to 1 October 2014, the percentage of trading in the shares which occurred on the LSE represented approximately 1 per cent of total trading volumes. Furthermore, in May 2014 the UAE was moved from frontier to emerging market status under the MSCI index classification system, it is understood that this will help companies listed on NASDAQ Dubai and the country’s other stock exchanges attract even more interest from international investors.

Against this backdrop, the Directors believe that the Dubai listing is a sound base for DP World’s international shareholder base. As such, the Directors, and separately the independent directors of DP World, are of the view that there is no material benefit in maintaining the London listing. The shares will continue to be traded on NASDAQ Dubai and, given the low volume of trading in DP World’s shares on the LSE, the Directors believe that from a liquidity perspective there will be no negative impact. The Directors continue to be committed to high standards of corporate governance.

In order to effect the Delisting, DP World is required to obtain prior approval from its shareholders pursuant to the UK Listing Rules. Accordingly, at the Extraordinary General Meeting to be held on 18 December 2014, a shareholder resolution, authorising the Board to proceed with the Delisting will be proposed (Delisting Resolution).

Conditional upon the Delisting Resolution receiving both general and independent shareholder approval at theExtraordinary General Meeting, DP World will apply to cancel its London listing and to remove its securities from trading on the Main Market of the LSE. It is anticipated that the Delisting will take effect on or about 21 January 2015, being in any event not less than 20 London business days following the passing of the Delisting Resolution.