US President Donald Trump has hailed a deal led by US firm BlackRock to buy most of the US$22.8 billion (S$30.5 billion) ports business of Hong Kong conglomerate CK Hutchison which includes assets along the Panama Canal.
The deal will give the US consortium control of key Panama Canal ports amid White House calls to remove them from what it claims is Chinese ownership. On the first trading day after the deal's announcement, CK Hutchison stock soared nearly 25 per cent.
"My administration will be reclaiming the Panama Canal, and we've already started doing it," Trump told the US Congress.
"Just today, a large American company announced they are buying both ports around the Panama Canal and lots of other things having to do with the Panama Canal and a couple of other canals."
The deal with the BlackRock-led consortium includes 90 per cent of Panama Ports Company, which has operated the Balboa and Cristobal ports at each end of the canal for over two decades, CK Hutchison said.
In total, the consortium, which includes Terminal Investment and Global Infrastructure Partners, will control 43 ports comprising 199 berths in 23 countries, the conglomerate said.
The conglomerate's stock rose as much 24.7 per cent on Wednesday (March 5), outpacing a 1.7 per cent rise in Hong Kong's broader Hang Seng Index. Its price is now the highest since Aug 1, 2023.
The sale involves CK Hutchison's 80 per cent stake in Hutchison Ports with an equity value of US$14.21 billion. However, the conglomerate will receive more than US$19 billion following repayment of some shareholder loans.
The size of the proceeds would be similar to CK Hutchison's entire Hong Kong market value prior to Wednesday's share rally.
The remainder of Hutchison Ports is owned by Singapore's PSA International.
About 12,000 ships used the Panama Canal last year that connects 1,920 ports across 170 countries. Its position is strategic for the US as more than three-quarters of vessels passing through originate in or are bound for the US.
"I would like to stress that the transaction is purely commercial in nature and wholly unrelated to recent political news reports concerning the Panama Ports," CK Hutchison co-managing director Frank Sixt in a statement.
The conglomerate had been waiting for Panama Supreme Court to make a final ruling about the legal status of its contract to operate the ports after the local attorney general determined the contract "unconstitutional".
CK Hutchison, controlled by billionaire tycoon Li Ka-shing, has businesses in areas as varied as infrastructure, retail and telecom. It is also the world's largest privately owned port operator.
The sale of the ports unit does not include any interest in Hutchison Port Holdings HPH Trust, which operates ports in Hong Kong, Shenzhen and South China, or any other ports in China, the conglomerate said in the statement.
Sixt said the transaction was the result of "a rapid, discrete but competitive process" during which CK Hutchison received numerous bids and expressions of interest.
JPMorgan in a report said while selling the Panama business is "understandable", the deal is nevertheless a "surprise" given most of CK Hutchison's other ports are not in regions directly exposed to Sino-US geopolitical tension.
It could be "an opportunistic deal", JPMorgan said. "Based on our understanding of the management philosophy of CKH, any deal is possible as long as 'the price is right'."
The brokerage said the deal would represent a significant strategy shift because ports would only account for one per cent of the conglomerates earnings before interest, tax, depreciation and amortisation, from 15 per cent.
The contribution of infrastructure, currently the largest segment, will rise to 33 per cent from 28 per cent.
The US$19 billion that CK Hutchison is set to receive from the sale is well above a US$13 billion valuation on the ports assets estimated by analysts.
"The disposal would be significantly value enhancing for CK Hutchison if it is completed on the preliminary essential terms," Citigroup analysts said.
CK Hutchison's net debt level was HK$138 billion (S$23.7 billion) in June and the sales proceeds could put the conglomerate into a net cash position, UBS analysts said.
Source: Reuters
