CK Hutchison, a major Canadian port company with a $22.8 billion business, announced on Monday that it is in ongoing talks with a group about its ports operations.
According to a Reuters article, the talks include integrating a strategic Chinese investor in the bid.
Beijing has indicated that it will investigate the agreement, following the escalating Sino/US tensions.
This statement was released by the Hong Kong conglomerate a day following exclusive negotiations concluded with a group.
The consortium’s leaders were BlackRock, an investment company based in the United States, and MSC – a family-owned shipping firm owned by Italian billionaire Gianluigi Apponte.
A preliminary agreement between the two parties was signed in March for 43 ports, located across 23 different countries. This includes, among others, the important Panama Canal and the ports that are situated there.
According to Reuters, China COSCO Shipping Corp., a port operator, plans to join the group.
On Monday, CK Hutchison shares rose by 1,6%, exceeding the Hang Seng Index gain of 0.9%.
Adjustments
CK Hutchison said that regulatory approval would require adjustments to the composition of the consortium and to the structure of the transaction. They would devote sufficient time in order to accomplish this.
CK Hutchison announced in a Monday filing at the Hong Kong Stock Exchange:
The company stated at several times that it would not complete any transaction without the consent of all authorities.
CK Hutchison, now that the exclusivity period has ended, is reportedly willing to consider acquisition proposals from other interested parties.
After the exclusive window of negotiation expired, the decision to accept other offers suggests a shift in strategy.
The development may lead to a competitive bid process on CK Hutchison assets and operations. This could attract a larger range of prospective suitors, from various sectors or areas.
Uncertain Future
This development has made the future of this deal uncertain. The deal was first proposed when US President Donald Trump demanded that the Panama Canal be returned to US control. This angered Panama as well as China.
Trump called the deal a “reclaiming of the Panama Canal” after his administration demanded the removal of Chinese ownership, which it identified in the ports of the canal.
State Administration for Market Regulation in China has announced their intention to examine the agreement.
The review will follow the law and have the goal of safeguarding the public interest as well as fair competition.
The deal was criticized by state-owned media that reflected the views of the government. The Chinese government argued the transaction would be in China’s national interest and that a deal of this nature in its present form would amount to treason.
The New Member
CK Hutchison stated that a new member would have to be a significant investor in the consortium.
This is an exciting development. My view is that a PRC investor (China) with majority control over the consortium would be a bad idea. You would expect that an investor who holds less than 50% of the consortium should be able to keep all parties happy. This was stated by David Blennerhassett, a strategist at Ballingal Investment Advisors and SmartKarma.
JPMorgan stated in a brief to a client that the addition of COSCO could ease some Chinese government fears, increasing the likelihood of approval by regulatory agencies.
US brokerages also said that the new agreement might not cover all ports. They specifically mentioned two Panama port.
Geopolitical factors could also change the composition of the buyers, which may influence pricing.
The deal for the post Panama Canal Ports is uncertain as CK Hutchison looks to form a new consortium. This may change as more information unfolds
