The world container ports industry faces the biggest shake-up in its history after P&O, one of the greatest names in British shipping, said yesterday it was recommending a £3.33bn cash offer from Dubai's DP World.

The agreement will make DP World - which a year ago had little business outside its home base - the world's third biggest container terminal operator by throughput, with terminals on every main trade lane.

Although DP World has given no public sign of considering a stock market listing, aspects of the agreement suggest that it is keeping that option open. The $9.3bn (£5.4bn) financing package includes an innovative Islamic bond issue convertible into shares in DP World in the event of an initial public offering.

Most analysts thought the deal was likely to go through because of the generous price of 443p a share, 24 times last year's earnings and 46 per cent above the share price before speculation of a deal emerged. Shares in P&O rose 4½p to 439½p.

Any potential counterbidder is likely to be deterred by terms announced yesterday that oblige P&O to pay DP World £34m if the deal fails. Sir John Parker, P&O chairman, said the agreement was very good for shareholders.

Referring to Sultan Ahmed bin Sulayem, DP World's chairman, he said: "After some tough negotiations we arrived at a figure that our board was happy to recommend."

P&O is the world's number four container port operator and DP World number six. DP World, owned by Dubai's state-owned Ports, Customs and Freezones Authority, will maintain P&O as a separate entity, with headquarters in London. Robert Woods, P&O chief executive, will remain in charge of the business.

DP World will contribute £125m to P&O's pension scheme, which faces a deficit of about £200m, and will pay another £75m over five years.

It plans to keep the ferries business and P&O's property portfolio, which management had been selling off.

DP World's advisers last night had no explanation for the IPO reference in the financing agreements. But the terms would allow DP World to pay bondholders less if there were a listing within three years than if the company retained its present ownership.

The agreement will realise £4.5m in gains for Mr Woods and £3.5m for Nick Luff, finance director. DP World was advised by Deutsche Bank and P&O by Citigroup and Rothschild.