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Ports deal crumbles as Dubai firm promises to sell U.S. assets

WASHINGTON—With President Bush unable to contain a Republican congressional rebellion, a company owned by the United Arab Emirates vowed Thursday to turn over its just-acquired operations at six major U.S. port terminals to an American entity.

The surprise move came after congressional leaders told Bush on Thursday morning that there was no way to stop lawmakers from blocking Dubai Ports World's takeover of terminal operations at the ports.

Republican and Democratic lawmakers reacted cautiously to the company's apparent surrender, saying they needed to learn more about the details before abandoning their attempts to block DP World.

DP World obtained the terminals as part of its acquisition of Peninsular and Oriental Steam Navigation Co., a British firm. That transaction, which the Bush administration approved in January, aroused a public furor that drove Congress into open conflict with the White House.

The announcement was an extraordinary retreat that signaled a shift in the power relationship between the White House and Congress. Bush has been unused to losing. But this time, the Republican-led House of Representatives, which has been a rubber stamp for the president for the past five years, was the first to revolt.

Republicans were furious when the president promised last month to veto any legislation that blocked the deal. Congress ignored Bush's threat, and a 62-2 vote to block the deal by the House Appropriations Committee on Wednesday left no doubt that Congress would override a veto if the president dared to cast one.

After Thursday's meeting of congressional leaders with Bush at the White House, DP World's chief operating officer, H. Edward Bilkey, surprised lawmakers when he issued a statement promising that the company would divest itself of its U.S. terminals.

"Because of the strong relationship between the United Arab Emirates and the United States and to preserve this relationship, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, vice president and prime minister of the UAE and rule of Dubai, has decided to transfer fully the U.S. operations of P&O Ports North America Inc. to a United States entity," Bilkey's statement said.

Nevertheless, Senate Democrats pressed ahead with attempts to block DP World's takeover, and House leaders weighed whether to proceed as well.

Critics of the original deal weren't backing away from congressional action.

"I'm skeptical," said Rep. Mark Foley, R-Fla. "I'd prefer (legislation) go through because it gives us a safeguard."

Likewise, Rep. Jerry Lewis, R-Calif., the chairman of the House Appropriations Committee, said he didn't intend to remove the ports provision from an emergency spending bill for hurricane relief and the war in Iraq.

Rep. Ileana Ros-Lehtinen, R-Fla., added: "Congressional plans are to move forward with the appropriations language next week which kills the transaction. Just to make sure."

DP World would have taken over terminals in Miami, Philadelphia, New York, New Jersey, Baltimore and New Orleans as well as some stevedoring operations at 15 others.

Some lawmakers noted that the company's statement stressed its desire that "DP World will not suffer economic loss" in transferring its U.S. operations.

"That means to me they would have to be made whole in a situation where any legitimate investor would actually presume that they could get a real good price because it's a distressed sale," said Sen. Jack Reed, D-R.I. "They're selling out because they can't operate the franchise."

The question that loomed late Thursday was who would buy the U.S. interests, and whether the firm would sell the assets in pieces.

Eller & Co., whose Miami subsidiary Continental Stevedoring & Terminals sued to block the sale, said it might attempt to buy the terminals. "We are certainly encouraged by what the statement said," Eller attorney Michael Kreitzer said. "We think we are one of the companies (that could buy it). We have been in the business for 70 years. We could do it."

Rep. Peter King, R-N.Y., an early opponent of the DP World deal and an influential one as the chairman of the House Homeland Security Committee, said Thursday's announcement was encouraging. "I don't think Dubai ports would have done this ... if they didn't think there was someone out there," he said. "Hopefully they have more than one (bidder), otherwise they're going to have to do a fire sale."

Michael Hopkins, the vice president of Crowley Liner Services at Port Everglades in Florida, said he expected DP World to sell its interests to several firms rather than one large operator.

"For Eller, this is a great opportunity," Crowley said. "I see more locally owned stevedoring companies jumping in."

Some said Maher Terminals, which already operates in the Port of New York/New Jersey, might buy P&O's interests there. Other candidates include Oakland, Calif.-based Marine Terminals Corp. and Seattle-based Stevedoring Services of America.

"To be honest, I have no idea," said Steve Erb, who manages P&O ports operations in Miami. "I can just say that the five largest terminal operators in the world aren't American."

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(Steve Harrison and Lesley Clark of The Miami Herald contributed to this report.)

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The White House attitude toward Congress' objections to the ports deal changed dramatically as it became clear that lawmakers wouldn't yield:

"They ought to look at the facts and understand the consequences of what they're going to do. But if they pass a law, I'll deal with it, with a veto."

_President Bush, threatening members of Congress on Feb. 21.

"Our emphasis is on not trying to draw lines or issue veto threats, it's on how we can work together and move forward."

_White House spokesman Scott McClellan on Thursday, after it became clear that Bush would lose a veto showdown.

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What's Next:

DP World will seek U.S. buyers of U.S. port terminal operations it acquired from British firm P&O Ports.

The House of Representatives is scheduled to vote next week on a spending bill for Iraq and hurricane relief that includes a provision to block DP World from operating in the United States.

Republican leadership must decide whether to keep that provision in or strip it out.

Senate Democrats will keep pushing for their own provision to ban DP World from the United States.

Some lawmakers are also pushing for broader legislation to ban port operations by any company owned by a foreign nation. China and Singapore also operate terminals through state-owned firms.

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(c) 2006, Knight Ridder/Tribune Information Services.

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