DP World, Carlyle Group Intertwined

Update: 6 December: According to a seemingly well-placed commenter, final bids are under review, with The Carlyle Group still ranked number one. "There may be some unofficial announcement later this week."

Originally published 13 November
Regarding Friday's piece on DP World and management of US ports, a reader asks: Is there a connection between The Carlyle Group and the French firm CMA CGM? Both are mentioned as finalists in the bidding for management of 20+ US ports. And ports remain a weak area in US "homeland security."

Given the meteoric increase in Carlyle's assets since 9-11 -- as well as its political connectedness -- the question seems worth a probe. Then there's this tidbit: In 2003, Carlyle bought CSX World Terminals for $300 million -- and in 2004 they sold the firm to Dubai Ports World (now DP World) for $1.15 billion. Today they're looking to buy DP World's US assets that came about from its purchase of Britain's P&O. Circular.

But wait! There's more: US Liberals Guide Deborah White reported in February that the United Arab Emirates -- which owns DP World -- "is a major investor" in Carlyle. Circular times two.

The Carlyle Group
The firm was formed "in 1987 by David Rubenstein, a former aide to President Jimmy Carter; Daniel A. D'Aniello, former vice president of Finance for Marriott Inc.; and William Conway, former CFO for MCI Communications."

One of the world's largest privately-held equity firms, Carlyle manages $44.3 billion in 42 investment funds. That is four times the reported funds of $12 billion in December 2001. According to critics, much of that increase is war profiteering.

To say that Carlyle is politically connected is the understatement of the century. From the RedHerring in December 2001:

Among those associated with Carlyle are former U.S. president George Bush Sr., former U.K. prime minister John Major, and former president of the Philippines Fidel Ramos. And Carlyle has counted George Soros, Prince Alwaleed bin Talal bin Abdul Aziz Alsaud of Saudi Arabia, and Osama bin Laden's estranged family among its high-profile clientele...

[W]artime is boom time. No one knows that better than the Carlyle Group, which less than a month after U.S. troops began bombing Afghanistan filed to take public its crown jewel of defense, United Defense... [t]hat this company is even able to go public is testament to the Carlyle Group's pull in Washington...

According to the company website: "Carlyle focuses on sectors in which it has demonstrated expertise: aerospace & defense, automotive & transportation, consumer & retail, energy & power, healthcare, industrial, real estate, technology & business services and telecommunications & media."

Note that managing port facilities is not specifically in this list, but it could fall under the rubric "transportation" (except the blurb suggests they are talking about auto-related transport services - evidenced by the portfolio list). So where is the demonstrated expertise (other than political clout) ... especially since they sold CSX to DP World in 2003?

CMA CGM
According to the company website it is the third largest container shipping company in the world. None of the firm's subsidiaries show up in the Carlyle portfolio. CMA CGM (America) is headquartered in Norfolk, VA.

According to The Business, CMA CGM would be a junior partner with US giant Morgan Stanley. Morgan Stanley was founded in 1935 and manages $650 billion in assets. Unlike Carlyle, Morgan Stanley is a publicly-traded firm; it is also an investment banker.

Port Deal Backstory
In February, Anacher Forester wrote:

Former Reagan Chief-of-Staff, ex-Treasury Secretary, ex-Secretary of State, ex-NSC Council Member, ex-GWB chief legal advisor, etc, and recent US Special Envoy for Iraq debt [James A. Baker] is the invisible man in the middle of this mess...

James A. Baker also serves as Senior Counsel to the secretive Carlyle Group where The Guardian has reported his equity stake at an estimated $180 million US.

Let me add that Baker is the leader of the team Congress put together to explore ways to "win" the Iraq conflict. And one-half of the Baker-Carter Commission which investigated voting issues in the US -- reporting to the President in 2005.

Another key individual: John Snow, Treasury Secretary. I wrote in February that the deal, then, was one of connections. Seems nothing has changed on that front.

What's also not changed is this tale as a metaphor for Thomas Friedman's "flat world" of globalization. The port deal was, at the time, a wake-up call for Americans, most of whom remain unaware of the extent of foreign ownership of US-based companies and foreign ownership of our growing national debt. Wasn't much about this issue in political-speak before last week's vote, now was there?

Read more: DP World and U.S. Port Security, Center for Nonproliferation Studies.

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