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Hong Kong-based CK Hutchison has said a controversial $23bn ports deal including key assets in the Panama Canal will not close this year, as it seeks to win Beijing’s approval for the sale to a consortium backed by BlackRock.
Reporting interim results on Thursday, CK Hutchison said the deal, which involves 43 non-Chinese ports, was taking “much longer than expected”, though it added that there was still a “reasonable chance” that an agreement could be reached as a “major” Chinese investor is set to be brought in.
Beijing blasted the ports sale announced in March as a threat to China’s national interests and insisted that it undergo the country’s merger review process even though no mainland assets were involved.
An exclusive negotiation period for BlackRock and Swiss-Italian shipping group MSC expired on July 27. China’s state-owned shipping conglomerate Cosco is now seeking at least a 20-30 per cent stake in the deal, the Financial Times previously reported.
“With a deal of this size and complexity, closing . . . would not in any case occur this year even if binding [new] arrangements are agreed this year,” Frank Sixt, CK Hutchison co-managing director, told analysts on Thursday.
“There is a reasonable chance that those discussions will lead to a deal that is good for all of the parties,” Sixt added. “It is taking much longer than we had expected . . . But frankly that’s not particularly troublesome.”
The initial deal terms would have given BlackRock a controlling stake in its two ports at both ends of the Panama Canal, while Aponte family-controlled MSC would become the majority owner of the rest of CK Hutchison’s 41 non-Chinese ports including in south-east Asia, Europe and the Middle East.
But the deal has drawn Beijing’s ire — not helped by US President Donald Trump saying in March that it amounted to “reclaiming the Panama Canal”.
Cosco is currently the only Chinese conglomerate allowed to join the talks, the FT previously reported, giving it strong negotiating power over BlackRock and MSC who are likely to need a Chinese partner to win approval from Beijing.
CK Hutchison on Thursday added that a new deal was likely to “be capable of being approved by all of the relevant authorities” including from China.
The comments came as the group reported a 11 per cent jump in earnings before interest and taxes for its ports business for the first six months of this year, to HK$7.2bn. It said the division was expected to deliver “good” earnings growth in the full year.
Net profit for CK Hutchison, however, fell 92 per cent during the same period to HK$852mn. The group attributed the drop to an almost HK$11bn one-off non-cash loss from the merger of its Three UK with Vodafone’s UK business, which completed in late May.
The company said the loss had “no impact” on its cash flow, and declared an interim dividend of HK$0.71 per share, up from HK$0.69 per share the same time last year.
Additional reporting by Ryan McMorrow in Beijing
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