Topaz deal opens DP World to energy industry's volatility

The acquisition equates to about 7 per cent of DP World's 2018 ebitda, Moody's says

DP World bought Renaissance Services's Topaz Energy unit. Courtesy: Topaz Energy

DP World's acquisition of Topaz Energy and Marine will expose the ports operator to greater volatility given its first foray into the oil and gas industry, according to Moody's Investor Services.

The acquisition equates to about 7 per cent of DP World's 2018 earnings before interest, taxation, depreciation and amoritization (ebitda), the credit rating agency said on Wednesday.

"While it adds to the DP World’s business diversification it makes DP World’s cash flows susceptible to increased volatility given Topaz’s exposure to the cyclical oil and gas industry,"  Dion Bate, vice-president and senior analyst at Moody’s, said.

This week DP World said it acquired Topaz Energy and Marine from Oman's Renaissance Services and Standard Chartered's private equity arm for an enterprise value of $1.08 billion (Dh3.96bn).

The deal is subject to regulatory approvals and is expected to be completed in the second half of the year, DP World said on Monday.

The Dubai-based ports operator has been on an investment spree since 2018 as its growth strategy evolves to include the wider logistics supply chain. It snapped up UK-based transport and logistics company P&O Ferries, Indian rail logistics company Kribhco Infrastructure and Chile ports operator Puertos y Logistica.

Analysts said oil services firm Topaz Energy was not the most obvious choice to add to DP World's traditional ports and logistics operations since it was part of the oil and gas sector. However, several factors such as the value of the transaction made the deal attractive, they said.