Dubai, Jan. 27, 2006 (WAM) -- Peninsular and OrientalSteam Navigation Co (P and O) on Thursday accepted Dubai PortsWorld's 3.88 billion Pound Sterling (USD6.9 billion) new offer,trouncing the 3.54 billion Pound Sterling (USD6.3 billion) bidfrom Singapore's PSA International.

Dubai had earlier offered 3.32 billion Pound Sterling (USD5.9billion) for the UK port operator.

P and O board, which earlier yesterday agreed to be acquiredby Singapore, said it would not consider any further bid below545 pence per share.

"DP World and P and O have agreed the terms of an increased recommended cash offer to be implemented by scheme of arrangement of 520 pence per unit of deferred stock," P and Osaid in a statement received by Gulf News late Thursday night.

The P and O directors "have withdrawn their recommendation ofthe offer by PSA, which was announ-ced on January 26 and unanimouslyrecommend that P and O stockholders vote in favour" of the Dubaioffer at the meetings, which are now scheduled for February 13.

Dubai's new bid represents a premium of 10.6 per cent to thePSA offer of 470 pence for each share.

The offer by PSA, owned by the Singaporean government's investmentarm Temasek, was a sweetened bid on Dubai Ports World's November29 offer of 443 pence for each P and O share.

Stakes are high for both Dubai and Singapore as control of P and O would decide which of the two successful business citieswould enjoy global shipping dominance at a time of rising internationaltrade.

A takeover of P and O by PSA would have made Singapore the world'stop port operator, overtaking Hong Kong's Hutchison Whampoa.

Acquiring P and O's 29 container terminals and logistics operationsin 19 countries would make Dubai the world's number-three portoperator after Hutchison and Temasek.

The issue is as much about ambitions as it is about commerce.

Jeremy Batstone, head of investment strategy at broker CharlesStanley in London, told Gulf News the matter has gone "beyondfinancial considerations."Neil Davidson, director of research at Drewry Shipping Consultants,said: "It remains to be seen which of the two contenders wantsit [P and O] more than the other."In a bidding war "shareholders of P&O are in a lucky position,"he said.

The battle for P and O is the second major contest between DubaiPorts and PSA in two years. In 2004, Dubai paid USD1.15 billionfor the port assets of US company CSX Corp for which PSA reportedly offered USD1 billion.