Threats Fly in Dubai Deal

Reminiscent of the battles that raged over the acquisition of P&O Ports’ U.S. operations by Dubai-based DP World, the AIG Global Investment Group deal to fulfill a requirement to transfer the terminal operations to a U.S.-based company was nearly scuttled by fees sought by the Port Authority of New York and New Jersey (PONYNJ). The Port Authority wanted AIG to commit to $84 million in order to transfer the lease for facilities that had been operated by DP World. The fees included $30 million to recoup investments the Port Authority had made in the Port of Newark Container Terminal (PNCT). Another $50 million was in the form of commitments to invest in port infrastructure.

Senators Charles Schumer (D-NY) and Robert Menendez (D-NJ) quickly threw accusations at the port that it was demanding a “ransom fee” and threatened to withhold support in Washington for projects sought by the Port Authority. Senator Schumer was a principal opponent of the DP World acquisition of facilities that had been operated by P&O Ports, pointing out at the time concerns over national security. Now, he and Senator Menendez were chiding the Port for potentially putting security and safety at risk if the AIG deal did not go through.

AIG had agreed to acquire the leases at six U.S. ports. In addition to Newark, the deal included operations in Baltimore, Philadelphia, Miami, Tampa and New Orleans and stevedoring in 16 locations. The other port authorities appear to have approved the deal without asking for additional fees or financial commitments.

As with most political wrangling, a compromise has been reached. “Following positive talks, representatives of DP World, AIG Global Investment Group and the Port Authority have reached an agreement in principle that will allow Ports America, Inc. (an affiliate of AIG Global Investment Group) to acquire DP World’s interest in the Port Newark Container Terminal,” said a statement by the Port Authority.

“Ports America affirmed its plan to make capital expenditures of a minimum of $50 million in the Port Newark Container Terminal during the life of its investment, including $10 million earmarked for the Port Authority’s development of port rail infrastructure surrounding PNCT. The parties believe that Ports America’s commitment will help ensure the continued growth of jobs and economic activity at the port.

“In addition, the Port Authority concluded that materials and information it received regarding Ports America and its ownership have confirmed that it will be a suitable terminal operator and partner committed to making investments that are critical to the continued strength and viability of the Port of New York and New Jersey, the leading East Coast destination for international shippers.”

State officials in New Jersey (which owns the Port of Newark) will review the deal.

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