Scotch the ports deal

The Washington Times ^ | February 22, 2006

[KarlInOhio]

In two weeks time, the ports of New York and New Jersey, Miami, Baltimore, Philadelphia and New Orleans will go under contract to a government-owned company in the United Arab Emirates.

< snip >

The most immediate thing Congress can do is ask that President Bush put a hold on the deal and order the Committee on Foreign Investment in the United States to conduct a 45-day investigation of Dubai Ports World. Mr. Bush yesterday vowed, with a certain heat, to veto a ports bill; firm congressional action may nevertheless lead him to reconsider. There is a chance the deal would dissolve with the tougher 45-day review -- this has happened to previous reviews by the foreign investment committee -- and in this case it is clearly warranted. Last week, it emerged that both Dubai Ports World and Peninsular and Oriental Steam Navigation Co., the seller, specified that an agreement by the U.S. government not to make a formal investigation as a condition for the deal. This is exceedingly odd; this is enough to persuade Congress to push the review. < snip >

[KarlInOhio]

I haven't seen this before. Who in the government made an agreement to "not make a formal investigation"? That should be tracked down and announced to the public.

This deal might be bad for the U.S. or it might not - but the secrecy shows that something is rotten in the state of Dubai.

[sarasota]

I wonder from where this info "emerged" last week. Any facts to back that up?

[benjamin032]

None of this deal has been explained at all, kinda makes me uncomfortable. I'm not willing to drop it outright, but there needs to be better disclosure.

[K-oneTexas]

I hadn't heard it either and it does make this stink even more. Answers must be found and shown to the general public. I can buy the fact that the President may not have know about this specific instance as he is not a micro-manager. But now that he does he does need to act and stop it.

This "deal" that was made or given needs to be run down. The deal maker need to be brought before the public at a minimum to explain him or her self. If they exceeded their responsibility then they should be brought before the courts.

A cross referencing article I missed yesterday:

P&O takeover won’t be hit by objections in US: Hughes
Khaleej Times Online ^ | February 21, 2006 | Criselda E. Diala

at: http://www.freerepublic.com/focus/f-news/1582858/posts

[snarks_when_bored]

Either kill the deal or else make it a condition of the deal that if it ever happens that a terrorist attack in the U.S. succeeds because of failures of port security at ports overseen by Dubai Ports World, the U.S. will immediately seize all U.S. assets of Dubai Ports World and also invade the United Arab Emirates and turn it into a Disney attraction for gawking infidel tourists.

[CharlesWayneCT]

The Bush administration has not adequately considered the questions raised by this deal

the editorial writers have no way to know whether they adequately considered questions. There is no evidence they didn't, other than assertions by editorial writers that since the deal is OBVIOUSLY bad, the administration MUST have missed something.

The editorial has some minor factual errors -- like saying the DP World was directly taking over contracts in 6 ports, when in fact they are simply overtaking the company that owns the american subsidiaries that oversee the ports now.

It also simply asserts that arabs can't be trusted to be involved in ports, ignoring that the DP World company is already involved in ports around the world, and no other ally has expressed a concern about this company.

It further ignores the clear law that the administration is operating under (which also belies the assertion that we "learned last week" that formal review was a condition -- I'll get to the later). That law precludes the administration from blocking a deal unless there is actual EVIDENCE that the COMPANY making the purchase WILL hurt security, AND that no existing law is adequate to mitigate the harm from that company taking over. I've seen nobody give that kind of evidence.

What of this "secrecy"? Without seeing the details, it's hard to say what the times is referring to -- it'd be nice if they gave a link to an actual news article in their paper where they might have given us facts, but I don't know if the paper actually COVERED this last week. But I can imagine that the deal included the ability for either side to cancel the deal if the U.S. requested a "formal review", which might be something in some other law which could take months and maybe effect the economics of the deal.

That would not be something "secret", it would be simple sound business practice. I remember several mergers which were terminated by agreements which had similar clauses allowing the deal to be cancelled if the U.S. raised formal objections thus driving up the costs of the merger.

In short, this editorial is still way more heat than light, weak on the facts, full of innuendo, and in the end based on the single recurring proposition of the opponents -- that we just can't trust Arabs to do business with us.

[Alberta's Child]

Last week, it emerged that both Dubai Ports World and Peninsular and Oriental Steam Navigation Co., the seller, specified that an agreement by the U.S. government not to make a formal investigation as a condition for the deal. This is exceedingly odd.

I'll have to review all of the facts related to this point before commenting on it. Not only is this odd, but it's probably illegal. I was under the impression that the U.S. law governing this kind of acquisition requires a formal investigation whenever a company owned by a foreign government is involved.

[sarasota]

Think it has something to do with the security details? (Trying to be optimistic.)

[L98Fiero]

"I'll have to review all of the facts related to this point before commenting on it."

You just about have to. There is SO much BS flying around about this the best thing to do is dig in and find the real facts.

[Prince Charles]

Last week, it emerged that both Dubai Ports World and Peninsular and Oriental Steam Navigation Co., the seller, specified that an agreement by the U.S. government not to make a formal investigation as a condition for the deal.

What were they trying to hide? This deal stinks more with each passing day.

[jimbo123]

The 45-day investigation is mandated by law when there are national security implications to the transaction.

[clawrence3]

The deal was announced in November, more than 45 days ago.

[jimbo123]

There was no 45-day investigation as mandated by law. Why are you against the 45-day review?

[CharlesWayneCT]

Here is the relevant portion of the agreement. BTW, agreements like this CAN'T have secret parts, this was a global economic deal governed by laws which require full disclosure of the facts to the stockholders. This assertion of secrecy is at best an admission that the Washington Times simply didn't know how to go on the web and get this information, which was posted at the P&O website for it's stockholders back in DECEMBER, and which I just accessed after a 10-minute search.

I highlighted what was likely the source of the Time's seemingly erroneous assertion of a deal not to investigate, note that it is in an "or" clause the includes a clause allowing an investigation. The relevant part is in BOLD within the following, which can be found in SECTION THREE of the large PDF file found by following the link.

To summarise the bold information: The agreement says it is valid if either the CFI decides it doesn't HAVE to investigate, OR if it investigates and the result doesn't oppose the deal, OR if the statutory time for an objection passes without an objection. NOTHING nefarious at all, just ignorant hyperbole from an editorial board that already announced opposition over a week ago and is trying to justify it's position.

Read the ENTIRE OFFER at: Offer of Purchase

2.1 the Offeror having made all necessary filings (‘‘EFA Filings’’) pursuant to the Exon-Florio Amendment, Section 721 of Title VII of the Defence Production Act of 1950, as amended, 50 U.S.C. App. Section 2170 (the ‘‘EFA’’) and:

2.1.1 the Committee on Foreign Investment in the United States (‘‘CFIUS’’) having advised the Offeror in writing of its determination pursuant to Section 800.502 of the United States Department of the Treasury’s regulations implementing the EFA (31 C.F.R. Part 800)(the ‘Regulations’’) not to investigate the acquisition by the Offeror of P&O’s United States operations (the ‘‘U.S. Acquisition’’); or

2.1.2 if CFIUS determines to investigate the U.S. Acquisition pursuant to Section 800.503 of the Regulations, the President of the United States having not announced a decision to take action against the U.S. Acquisition by no later than midnight on the fifteenth (15th)calendar day after the completion or termination of the investigation by CFIUS or, if the fifteenth (15th) calendar day is not a business day, no later than the next business day following the fifteenth (15th) calendar day, pursuant to Section 800.504 of the Regulations;

or

2.1.3 ninety (90) calendar days have elapsed since the Offeror submitted an EFA filing which CFIUS has accepted as complete;

[Petronski]

GREAT find.

[CharlesWayneCT]

See my post #14, showing what they were probably talking about with this "nefarious secret agreement".

I don't know if the law mandates a "45-day" review. There are obviously limits to the amount of time they are allowed to spend on a review, and the amount of time the administration then gets to make a formal decision after the review is completed. I don't know if that adds up to 45 days.

[clawrence3]

I am NOT against any requirement under the law. If you have some proof the laws were not followed in approving this transaction, please let us know.

[CharlesWayneCT]

Thanks, but it was pretty easy. I just looked at if from a shareholder point of view.

Last night I watched Neal Cavuto, and all the financial guys were on. They knew all about the deal because it is an economic deal, they knew the company, they knew why the sale was going down, they knew the implications, and they all thought the whole political thing was just theater.

Of course, they are representatives of the moneyed interests which are taking over the world.... :->

[ARCADIA]

Any facts to back that up?

How about: The transfer takes place in two weeks and there is no apparent report from the investigative panel.

[KarlInOhio]

Thanks. That is a good find. So the deal requires that the CFIUS takes a pass on it, that 15 days have passed after any CFIUS investigation without the President stopping the acquisition, or that 90 days have passed without CFIUS doing anything. So that doesn't imply that anyone has taken a pass on it, although I could understand why it might be construed that way.

What I suspect now is that the UAE has made some agreements with the US to allow this to go through, but they don't want the agreements made public because dealing closely with the US isn't the most popular thing to do in that part of the world. The President is trying to get this through without telling what the UAE is providing.

I'm still not wild about this, but I'm not calling the administration a bunch of sell outs right now. I'll leave those comments for the (lack of) border control issue.