DP World Limited and its wholly owned subsidiary, DP World FEZ, today announced that they have entered into an agreement to acquire Economic Zones World (EZW), its subsidiaries and subsidiary undertakings from Port and Free Zone World (PFZW) in a deal worth $2.6 billion.

The deal includes the assumption of net debt of $859 million as at June 30, 2014, DP World said.

In a separate move, DP World has sought approval from its shareholders to delist DP World’s shares from the London Stock Exchange (LSE). DP World will maintain its Nasdaq Dubai listing.

EZW is a provider of industrial and logistics infrastructure, which comprises five business units: Jebel Ali Free Zone (JAFZ), Jafza Enterprises, EZW Corporate, Business Center World and Emerging Business Units.

Jafz, EZW’s primary business unit representing 97 per cent of revenue and operating profit is a 57 sq km 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 said the proposed acquisition provides significant strategic, operational and financial benefits to the company, including:
• The creation of a leading integrated port and free zone in the Middle East region;
• A unique opportunity to control and optimise investment levels at Jafz – a strategically located asset integral to Jebel Ali port’s continued success as the leading gateway port in the Middle East region;
• Enhancing DP World’s competitive advantage by delivering a best-in-class customer experience by further strengthening Jebel Ali port’s integrated product offering, consistent with DP World’s strategy of providing port-centric integrated logistics solutions at key gateway locations;
• Stable recurring revenues, healthy margins and strong cash generation delivered by EZW;
• Significant growth opportunities from EZW from increasing occupancy, increasing lease rates and developing new investment properties, underpinned by the continued growth of Dubai as a trading and logistics hub;
• Attractive financial returns for DP World shareholders with the proposed acquisition expected to be more than 15 per cent earnings enhancing, to generate greater than a 7 per cent return on capital employed in the first full financial year following completion and to increase the enlarged DP World adjusted EBITDA margin to close to 50 per cent on a pro forma basis; and
• Retaining flexibility for growth with the enlarged DP World having pro forma leverage  of 3.3x net debt to adjusted EBITDA. DP World is expected to remain highly cash generative with no impact to its existing dividend policy, whilst also expecting to generate significant surplus cash for investment into growth and debt repayment.

Sultan Ahmed Bin Sulayem, chairman of DP World, said: “The acquisition of EZW represents a strategic and commercial opportunity that will benefit our customers as well as our company. Jebel Ali Port and Free Zone support and drive the growth of Dubai and the wider region of some two billion people. Together, we will be able to offer seamless supply chain services to shippers and shipping lines, linking sea, road and air across the port and the free zone to the new Al Maktoum Airport via the Dubai Logistics Corridor to help them further improve efficiency.

“Overall, this transaction is compelling from both a strategic and financial perspective. This will allow us to enhance our position as the leading logistics hub in the Middle East region, accelerate growth and deliver shareholder value”

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 $650 million 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 December 31, 2013, EZW generated revenue of $430 million, EBITDA of $348 million and pro-forma  profit before tax of $221 million.  As at June 30, 2014, EZW had gross assets of $3.7 billion on a pro forma basis.

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, the statement said. - TradeArabia News Service