Dec. 11 (Bloomberg) -- American International Group Inc., the world's largest insurer, agreed to buy DP World's six U.S. port terminals after the Dubai-owned company was forced to sell under pressure from U.S. lawmakers.

AIG's asset management arm, AIG Global Investment Group, will purchase the terminals plus cargo handling operations and a New York passenger terminal, DP World Chief Executive Officer Mohammed Sharaf said in a telephone interview today from Dubai, United Arab Emirates. DP World was seeking $700 million, Lloyd's List reported Oct. 3.

``They are 100 percent American and they offered the best price,'' Sharaf said, declining to comment on the value of the sale or whether DP World made a profit on the transaction. ``We want to come back to the U.S. should the timing be right and should we be welcomed,'' he said.

DP World in February bought London-based Peninsular & Oriental Steam Navigation Co. for $6.8 billion to become the world's third-biggest container-port operator after Singapore- owned PSA International Pte. It agreed to sell terminals in New York, Newark, Baltimore, Philadelphia, Tampa and New Orleans when the deal caused a political uproar in the U.S. Global trade volumes are forecast to grow 7.6 percent this year, according to the International Monetary Fund.

``It's a good long-term investment'' for AIG, said Donald Light, insurance analyst at Celent LLC, a Boston-based financial research and consulting firm. ``Over time it's a question of how global trade is going to go, and I think it's going to go way up. There is a finite supply of these ports.''

Proprietary Investments

AIG Global Investment Group manages $635 billion in assets, most of which are funds held to pay claims for policyholders of its property and casualty and life insurance businesses. The New York-based unit, which also manages assets for clients, has more than 1,800 employees in 44 offices around the world and invests in stocks, bonds, hedge funds, private equity and real estate.

The investment group owns power plants, a railroad and ship tracking service, waste transporters, landfills, and water treatment companies, according to its Web site. Last month an AIG buyout fund announced the purchase of Interstate Waste Services, a New York-based collector and transporter of solid waste in upstate New York and New Jersey. Terms of the transaction weren't disclosed.

``We have identified the marine terminals sector as a key element in our infrastructure investment strategy,'' said Christopher Lee, managing director of AIG Global Investment Group, in a statement. AIG spokesman Chris Winans declined to comment on the purchase price. Shares of New York-based AIG rose 65 cents, or 0.9 percent, to $71 in New York Stock Exchange composite trading.

Port Assets

``What we are seeing at the moment is a lot of financial institutions interested in ports assets, particularly container terminals,'' said Tim Power, director at Drewry Shipping Consultants in London ``Container traffic volumes grow faster than GDP and, unlike other parts of the shipping market, the revenue rates earned by these terminals are rather stable or will grow at slightly less than inflation.''

Ontario Teachers' Pension Plan, Canada's third-biggest retirement-fund manager, agreed last month to buy four North American container terminals from Orient Overseas (International) Ltd. for $2.35 billion.

Lawmakers, including New York Democratic Senator Charles Schumer, threatened to block DP World's purchase on the grounds that two of the Sept. 11 hijackers had come from the U.A.E. and that the plotters used the Persian Gulf country's banking system to funnel money to the operation.

`Final Chapter'

``This is an appropriate final chapter to the book on the Dubai Ports World deal,'' Schumer said in a statement today. ``This is very likely to receive broad support in Washington and throughout America. The winning bidder should be a good partner for America's commerce and security and I expect it will go through the regulatory process smoothly, easily, and successfully.''

Dubai ``understands even at the peak of the crisis earlier this year there was no damage to the relationship between America and the U.A.E.,'' Mustafa Alani, director of national security at the Gulf Research Center in Dubai, said in a phone interview from Dubai.

The terminals accounted for 10 percent of P&O's global assets before Dubai's takeover.

``Our understanding with the U.S. authorities is that we will sell to U.S. entities with no economic loss,'' Yuvraj Narayan, DP World's senior vice president for corporate strategy, said in an interview March 15.

Dubai Investments

Dubai is using proceeds from record oil prices to buy overseas assets in a bid to lessen its reliance on oil-based industries and increase its profile as a tourism destination and financial services hub. This year the emirate paid $1 billion for a stake in Standard Chartered Plc after spending more than $4 billion last year buying assets including the Tussauds Group, owner of London's Madame Tussauds waxwork museum, and a $1 billion stake in DaimlerChrysler AG.

DP World now aims to transfer the terminals to AIG in the first quarter of 2007, according to Sharaf. The sale was entirely in cash, he said.

``I doubt it will have any impact'' on how much ship operators pay to use the ports, said Dan Togo Jensen, an analyst with Svenska Handelsbanken AB in Stockholm. ``It's a competitive market.''

Transactions in the shipping and ports sector jumped 41 percent to $30.6 billion in the first nine months of this year, compared with the same period in 2005, according to data compiled by Bloomberg.

Share Sale

DP World is planning an initial share sale to fund global expansion, and could be worth as much as $10 billion, according to estimates by London-based consulting firm Drewry Shipping.

Deutsche Bank Securities, Inc. acted as financial adviser to DP World, while Lehman Brothers Holdings Inc. advised AIG Global Investment Group. Sullivan & Cromwell LLP served as legal counsel to DP World, and AIG used Cleary Gottlieb Steen & Hamilton LLP.

To contact the reporters on this story: Will McSheehy in Dubai, United Arab Emirates, at wmcsheehy@bloomberg.net; Massoud A. Derhally in Dubai, United Arab Emirates, at mderhally@bloomberg.net.

Last Updated: December 11, 2006 16:27 EST