(Reuters) – CK Hutchison stock gained more than 22% on Wednesday after the Hong Kong conglomerate sold a majority stake in a $22.8 billion ports unit, including assets along the Panama Canal, to a group led by U.S. buyout firm BlackRock.
The sale includes 90% of Panama Ports Company, which has operated the Balboa and Cristobal ports in the Central American country for over two decades, CK Hutchison said.
In total, the BlackRock-led group, which includes Terminal Investment and Global Infrastructure Partners, will control 43 ports comprising 199 berths in 23 countries, CK Hutchison said.
The conglomerate’s stock rose on the first trading day after the news, outpacing a 1.1% rise in Hong Kong’s broader Hang Seng Index. Its price is now the highest since August 1, 2023.
The sale involves CK Hutchison’s 80% stake in Hutchison Ports with an equity value of $14.21 billion. The conglomerate will receive more than $19 billion following repayment of some shareholder loans.
The remainder of Hutchison Ports is owned by Singapore’s PSA International.
The deal gives U.S. firms control of key Panama Canal docks amid White House calls to remove them from Chinese ownership.
About 12,000 ships used the canal last year which connects 1,920 ports across 170 countries. Its position is strategic for the U.S. as more than three-quarters of all vessels passing through originate in or are bound for the United States.
“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,” said CK Hutchison co-managing director Frank Sixt.
CK Hutchison had operated ports on the canal for over 20 years. Still, Panama’s attorney general this month determined that its port contract was “unconstitutional.” The Supreme Court in Panama was set to make the final ruling on its legal status.
SURPRISE
CK Hutchison has businesses in areas as varied as infrastructure, retail and telecom. It is also the world’s largest privately owned port operator.
JPMorgan in a report said while selling the Panama business is “understandable”, the deal is a “surprise” given most of CK Hutchison’s other ports are not in regions directly exposed to Sino-U.S. 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 1% of the conglomerates earnings before interest, tax, depreciation and amortisation, from 15%. The contribution of infrastructure, currently the largest segment, will rise to 33% from 28%.
(Reporting by Scott Murdoch, Clare Jim and Donny Kwok; Editing by Tom Hogue and Christopher Cushing)
Comments