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Dubai's $1.2 Bln Bid for U.S. Weapons Maker Delayed

Posted: 2006-03-22
From: Bloomberg
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Dubai, which agreed this month to sell its interest in U.S. ports, said its $1.2 billion takeover of a U.K. company with U.S. plants that make military equipment is delayed while the authorities investigate security concerns.

March 20 (Bloomberg) -- Dubai International Capital LLC, which is owned by the government of the Persian Gulf emirate, and Doncasters Group Ltd. agreed to delay the transaction by as many as two months from March 31 while government agencies review the purchase, Sameer Al Ansari, Dubai International's chief executive, said in an interview today.

``After what happened with Dubai Ports, the government is looking at this deal more closely,'' Al Ansari said after a press conference in Dubai announcing an agreement with HSBC Holdings Plc.

Dubai's bid may ignite a political debate in the U.S. similar to that caused last month by the emirate's $6.8 billion purchase of London-based Peninsular & Oriental Steam Navigation Co. DP World had to agree to sell interests in six U.S. terminals. Revenue from Doncasters' nine U.S. plants, which make parts for tanks and military aircraft, account for about 40 percent of total sales.

``If this deal isn't approved by the U.S., it wouldn't proceed,'' said Angus Blair, chief executive of Mena Financial, a London-based company which advises foreign companies about doing business in the Middle East.

The derailing of the ports plan was a setback for President George W. Bush, who was rebuffed by fellow Republicans and stung by polls that showed strong public opposition to the sale.

Security Threat

Democrat legislators also said they would introduce legislation to block the transaction on concern having an Arab government managing U.S. terminal posed a security threat. Dubai is one of seven sheikdoms making up the United Arab Emirates, from where two of the hijackers in the Sept. 11, 2001, attacks came.

The U.A.E. was one of three countries including Saudi Arabia and Pakistan that had diplomatic ties with Afghanistan's Taliban regime in September 2001. The regime harbored al-Qaeda leader Osama bin Laden.

The Committee on Foreign Investment, a federal body which considers the sale of U.S. assets to foreign companies, started a detailed 45-day investigation into the Doncasters agreement at the end of February, said Al Ansari.

Al Ansari declined to comment on whether the transaction will go through.

With Doncasters' U.S. unit accounting for 40 percent of sales, the overall transaction may become unattractive to Dubai if it failed to secure approval, Blair said by telephone from London.

``Forty percent is too big to ignore,'' he said. P&O's U.S. assets accounted for less than 10 percent of its global assets, according to a Feb. 24 statement.

Royal Bank

Dubai International is buying Doncasters from Royal Bank of Scotland Group Plc, its owner since 2001. Shaun Gamble, a spokesman for Royal Bank of Scotland in London, declined to comment in a telephone interview today.

Royal Bank of Scotland's private equity unit bought Doncasters, started in 1778 by Daniel Doncaster, for $261 million. The sale initially agreed to on Dec. 14 would represent a more- than-quadrupling of its investment in 4 1/2 years.

Dubai International last year spent $1 billion for a stake in DaimlerChrysler AG and 800 million pounds ($1.4 billion) for Tussauds Group, owner of London's Madame Tussauds waxworks museum.

Doncasters, which is based in Melbourne, England, has plants in Rincon, Georgia; Groton, Connecticut, and other U.S. sites. Its customers include Boeing Co. and General Electric Co., according to information on its Web site.

Gulf Arab governments, flush with record oil revenue, are spending billions of dollars on companies from South Korea to the U.S.

Kuwait's state-controlled PWC Logistics, which won a U.S. military contract last year worth as much as $14 billion to feed troops in Iraq, agreed in July to buy Santa Ana, California-based GeoLogistics Corp. for $454 million. GeoLogistics is an international freight management company with operations in more than 100 countries, according to its Web site.

To contact the reporter on this story:
James Cordahi in Dubai at
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