Canadian Pension Will Invest $2.5B in DP World and Jebel Ali Port
One of Canada’s largest private pension fund investment managers, Caisse de dépôt et placement du Québec (CDPQ) announced the formation of a joint venture that will make an investment of up to $5 billion in Dubai’s DP World’s Jebel Ali Port and related operations in the UAE. The deal marks the first direct foreign investment into Dubai’s ports and logistics assets as part of the UAE’s efforts at privatization attracting foreign investment and reducing the debt of the state-owned company. It is an expansion of the pension fund’s existing investments with DP World and in keeping with the Canadian investor’s interest in global infrastructure.
Under the terms of the agreement, CDPQ will make an initial investment of $2.5 billion to acquire approximately a 22 percent stake in the Jebel Ali Port, the Jebel Ali Free Zone, and the National Industries Park through a new joint venture. The investment is expected to close in the second or third quarter of 2022 and will be followed by a second tranche in the fourth quarter where other investors will have the opportunity to invest up to $3 billion to acquire an additional stake in the joint venture. The transaction implies a total enterprise value of approximately US$23 billion for the three assets.
A man-made port, Jebel Ali Port opened just over 40 years ago and has grown rapidly in recent years to become a key trading center providing access to the region. It is the second-largest port outside of Asia as well as the busiest in the Middle East and is ranked among the world’s busiest ports. Today it is included on more than 180 shipping routes and in 2021 Jebel Ali handled 13.7 million TEU, which was up about two percent versus 2020.
In addition to the port, the joint venture will also include the Jebel Ali Free Zone, which is the largest free zone in the Middle East and one of the largest in the world. The National Industries Park, a 21 sq. km area designated for manufacturing and processing companies, is also included to round out the three large assets in the UAE that will be available for international investment.
DP World highlighted that the investment would strengthen its balance sheet and provide an opportunity to capture growth potential across the wider region in the Middle East. The move toward privatization of a portion of some of the UAE’s premier assets will reduce the company’s net leverage to less than four times net debt to EBITDA.
Starting at the end of 2016, the Canadian pension investment manager has been building a broad portfolio of investments working with DP World. The companies initially launched an investment platform valued at $3.7 billion acquiring ports in Canada and later Chile and Latin America. In 2020, they agreed to raise the value of the total investment to $8.2 billion with CDPQ holding 45 percent of the platform. The current investments reach across four continents and 18 terminals.
Attracted by the stable and predictable returns and consistent demand for ports and infrastructure, CDPQ has tripled the size of its infrastructure portfolio. This new investment the Canadian investment manager said would expose it to fast-growing markets and new trade routes including in Africa and South Asia.