The world's fourth-biggest port operator is looking to diversify its revenue stream by expanding into businesses related to its core ports operations.
DP World expands global footprint with acquisitions in Peru and India
Dubai’s DP World acquired two new assets in Peru and India as the world’s fourth biggest port operator continues to ramp up its investments in the fast growing South Asian and Latin American markets.
The Nasdaq Dubai-listed company partnered with India’s government controlled National Investment and Infrastructure Fund (NIIF) to buy a majority stake in an Indian logistics and warehousing firm, their first investment as part of $3 billion spending plans for Asia’s third-largest economy. In Peru, the company acquired Cosmos Agencia Maritima, a logistics service business for $315.7 million, it said in two separate statements announcing the acquisitions on Sunday.
Hindustan Infralog, a DP World and NIIF’s joint venture investment platform, has agreed to snap up 90 per cent of India’s Continental Warehousing Corporation with the remaining stake retained by its founding Reddy family. The transaction value is below 5 per cent of DP World’s net asset value at the end of 2017, the company said without specifying the exact value of the deal or when it is expected to be completed.
“As a global trade enabler, we aim to grow in complementary sectors of the global supply chain, which includes inland container terminals, freight corridors and logistics infrastructure,” DP World group chairman and chief executive, Sultan bin Sulayem, said. “The acquisition of Continental Warehousing Corporation provides us with a scalable platform to accelerate growth in the rapidly evolving logistics sector in India.”
DP World, which last year acquired two state-owned maritime entities in Dubai for $405m, is looking to diversify its revenue stream by expanding into businesses related to its core ports operations. The company expects to spend about $1bn every year for the next three years as it boosts investments, adds capacity and acquires new assets in the UAE and beyond, Mr bin Sulayem told The National in January.
DP World is bullish on the growth prospects of the Indian market, particularly the logistics sector in the country, which is estimated to grow to $215bn by 2020. India currently has 34 multi-modal logistics parks and more than 1,300 infrastructure projects underway, the operator said in February.
The company formalised its partnership with NIIF in January by setting a $3bn investment fund to acquire and develop ports, terminals and transportation and logistics assets in India. The investment mandate stretches beyond the traditional sea ports as the fund will also target river ports and transportation, freight corridors, port-led special economic zones, inland container terminals and logistics infrastructure including cold storage.
The acquisition of the Continental stake will further enhance DP World’s presence in the overall logistics value chain in India. The current operations of the logistics firm are complementary to DP World’s existing remit in terms of the business model and geographic footprint providing significant new revenue opportunities over the long term, DP World said.
The acquisition in Peru, where DP World already operates a container terminal in the port of Callao, is also in line with its diversification plans. Cosmos owns a fully integrated logistics service business and a 50 per cent stake in Terminales Portuários Euroandinos, in Peru’s port of Paita, which is the second largest container terminal in the country.
“This acquisition supports our recent strategy of extending our core business into complementary sectors,” Mr bin Sulayem said. “The acquisition not only extends our footprint in Latin America, a region which we believe has significant growth potential but importantly adds to our existing presence in Peru.”
The addition of Cosmos allows DP World to offer improved services and give the company an option of alternative container capacity, he said. “Overall, we expect this acquisition to further diversify our revenue, improve the quality of our earnings and drive returns,” he said.