Free zone sale is perfect fit for DP World, and benefits may spread

Makes you wonder why nobody, at least in the financial media, thought of it before, writes Frank Kane.

There is such a neat circularity about DP World’s deal to buy Jebel Ali Free Zone it makes you wonder why nobody, at least in the financial media, thought of it before.

DPW gets to control the 57 square kilometres of industrial facilities just across Sheikh Zayed Road from its enormous port at Jebel Ali; Jafza businesses get access to the port under a fully integrated logistics and distribution structure that will speed efficiency and lower costs. And all within easy reach of the Expo 2020 site and new Dubai World Central Airport.

It could also give a boost to Kizad, the already-integrated port and free zone just up the motorway in Abu Dhabi. Sultan bin Sulayem, the DPW chairman, pointed out that Jafza occupancy is hitting 90 per cent and that Kizad will benefit from any overspill. Financially, the deal ticks all the right boxes for the emirate. Dubai World will benefit to the tune of US$3.5 billion, a big contribution towards the $4.4bn debt bill it must pay under a year from now.

That will allow Dubai World to extend the other larger chunk – about $10bn – of the restructuring until 2022.

Dubai World is still free to use the 80 per cent stake it holds in DPW – worth about $13bn – as security against this debt, which looks like a deal-clincher for any creditors still thinking about it.

Farewell to the LSE listing. Although a big deal was made of it back in 2011, how it would stimulate trading volumes and transform the share register, the negligible amounts actually traded in London suggest otherwise. Some big institutions do hold DPW stock now, but if they do any trading, it is on Nasdaq Dubai. The obvious lesson for any UAE corporates contemplating an expensive dual listing is: think twice.

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