In the shipping world, Dubai Ports enjoys a solid reputation as one of the Middle East's most successful companies. With its emphasis on services, Dubai has become a thriving trade center not only for the Persian Gulf but for Asia. "They ran a very efficient and successful port for years before they expanded into the international arena," says Neil Davidson, research director of London's Drewry Shipping Consultants Ltd.
Dubai, which has only modest oil reserves, has staked its future on an incredibly ambitious drive to be the region's leading commercial hub, a kind of Hong Kong on the shores of the aquamarine Gulf. As part of this strategy, the al-Maktoum royal family first developed the monster port called Jebel Ali in the 1970s. Jebel Ali now plays a key role in the booming global trade with Asia. "We continued building during all the wars; we took a risk, and it is paying off now," Sultan Ahmed bin Sulayem, Dubai Ports' chairman, said in an interview with BusinessWeek last year.
Bin Sulayem, a shrewd government official who has run the ports business for a quarter century, is one of three key advisors to Dubai's ruler, Sheikh Mohammed bin Rashid al-Maktoum. There seems to be no limit to al-Maktoum's aspirations. He has orchestrated the creation of one of the world's largest airlines, Emirates. He recently inaugurated a new financial center that is attracting the cream of the world's banks. And he has put bin Sulayem in charge of a plan to build tourist resorts on artificial islands shaped like palm trees.PREMIUM PRICE
But ports are the heart of Dubai's business. In December, 2004, the company bought the port operations of Jacksonville (Fla.)-based CSX Corp. for $1.15 billion, thus securing facilities in Germany, Hong Kong, and South Korea. The P&O deal, which Dubai won in a bidding war against Singapore's PSA International, will vault Dubai Ports from No. 7 to a three-way tie for second place among container-port operators.
By buying P&O, Dubai Ports takes over management of facilities in New York, New Jersey, Baltimore, Philadelphia, Miami, and New Orleans as well as in Britain, Australia, and Belgium. According to a P&O shareholders' document, the company had a $280 million loss on revenues of $4.8 billion in 2004, while Dubai Ports earned $330 million on sales of $570 million. To help finance its expansion, Dubai Ports raised $3.5 billion through a convertible bond issue in January, and plans an initial public offering. Dubai Ports' Web site lists U.S. shipping company veterans on its payroll, such as retiring Chief Operating Officer Edward H. Bilkey and Senior Vice-President Michael Moore.
The Dubai Ports World-P&O deal is far from cheap -- the Dubaians paid a 70% premium to P&O's stock price. But Davidson says the deal will give Dubai Ports "a wider geographical spread than any other operator."
To many in the industry, such clout does not translate into a security risk. The U.S. ports will remain staffed by Americans. U.S. Customs, the Coast Guard, and other authorities, not the terminal operators, will have overall control of security. Still, by Feb. 21 high-ranking Republicans had joined in Democrats' calls for President George W. Bush to rescind U.S. approval of the Dubai Ports-P&O deal, while Bush vowed to veto any legislation blocking Dubai Port's ambitions in the U.S. By Stanley Reed, with Mike McNamee in Washington, and Susann Rutledge in New York