AIG to buy Dubai's U.S. port assets

Times Staff Writer

Insurance giant American International Group Inc. agreed Monday to purchase an Arab company's politically mangled investment in several U.S. ports, ending a brief stewardship that unleashed a storm of criticism about foreign operators in American harbors.

The proposed transaction with Dubai Ports World signals the investment community's swelling interest in U.S. seaports, which have been handling a record flood of goods, and in other basic facilities.

AIG's asset management arm, AIG Global Investment Group, said it would buy leases of marine terminals in Newark, N.J., Philadelphia, Baltimore, Tampa, Fla., and New Orleans. The deal, which must clear federal and state regulatory hurdles, also includes cargo-handling operations in 16 locations on the East and Gulf coasts, along with a passenger terminal in New York, according to a statement by Dubai Ports World, a state-owned entity of the United Arab Emirates.

The company was said to be seeking $700 million, but neither Dubai Ports World or AIG would disclose terms of the deal.

In February, Dubai Ports became the world's third-biggest container-port operator through its $6.8-billion buyout of London-based Peninsular & Oriental Steam Navigation Co. But fierce congressional opposition grew amid concerns that port security could be compromised, and the Dubai company in March promised to find an American buyer for the U.S. assets.

New York-based AIG reflected legislators' safety concerns in its announcement of the deal, saying it was "very committed to ensuring that the company continues to be one of the industry leaders in setting standards for port security."

Although the facilities in the deal aren't top tier among U.S. port assets, either in terms of their value or the amount of cargo they handle, they still represent an attractive investment, port experts said. As the U.S. trade deficit continues to widen and the American appetite for imports shows no sign of slowing, port facilities are increasingly seen as a good bet.

"In the last 12 months, there has been a lot more investment activity in the various financial markets that has targeted infrastructure assets and terminal operators in particular. AIG is not interested in running terminals at U.S. ports. They are looking for very steady sources of income over a long time horizon," Josh Schaff, a ports analyst for Moody's Investors Service, said.

A growing roster of assets -- especially utilities, airports, seaports and toll-road operators -- are being sold, according to a recent report by Standard & Poor's Ratings Services titled "The Amazing Growth of Global Infrastructure Funds: Too Good to Be True?" The report said that $100 billion to $150 billion of fund money had been raised globally to buy such assets.

Analysts said the AIG deal should be viewed against that backdrop. AIG Global Investment Group manages $635 billion in assets and owns power plants, a railroad and ship-tracking service, waste transporters, landfills and water treatment companies.

"It's a sector bet, that sector being global trade and U.S. port assets. There is a relatively high level of protection against new entrants in the port business in the U.S." because new ones aren't being built and existing ports have trouble expanding, said Donald Light, senior analyst at Celent, a Boston-based research and consulting firm.

In November, the Ontario Teachers' Pension Plan, Canada's third-biggest retirement-fund manager, agreed to buy four North American container terminals from Orient Overseas International Ltd. for $2.35 billion. The terminals are in New York, New Jersey and Canada.

AIG Vice President Chris Winans said the proposed purchase would be the company's first involving ports.

"The guiding principle is any asset that is attractively priced and promises an attractive return is just something we are going to look at, although we have to be conservative in what we choose to invest in because we are an insurance company," he said.

Lawmakers hailed AIG's proposed purchase, which is expected to close early next year.

Rep. Edward J. Markey (D-Mass.) described the announcement as "welcome news." Sen. Charles E. Schumer (D-N.Y.) said the transaction "is happening in the broad light of day, where it should have been all along."

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