- Hutchison Ends Exclusive Talks, Opens Bidding After Regulatory Concerns.
- China Flags Competition Review, Pressures Ports Deal Restructuring.
- Geopolitical Tensions Cloud Sale of Panama Canal Ports.
CK Hutchison announced on Monday that it’s in talks to bring a major Chinese strategic investor into a consortium that’s bidding for its $22.8 billion ports business. This comes after Beijing decided to investigate the deal amid the ongoing tensions between China and the U.S., reports Reuters.
Exclusive Talks with Initial Consortium End
The Hong Kong-based conglomerate made this announcement just a day after its exclusive negotiations wrapped up with a consortium led by U.S. investment firm BlackRock and Italian shipping giant MSC, which is owned by the Aponte family. Back in March, these parties had reached a preliminary agreement covering 43 ports across 23 countries, including two ports along the Panama Canal, an area that’s becoming increasingly sensitive geopolitically.
COSCO Seeks Role in Consortium
According to a source familiar with the situation, China COSCO Shipping Corp, a state-owned operator of Chinese ports, is eager to join the consortium. BlackRock has chosen not to comment, and MSC and COSCO have yet to respond to media inquiries.
Regulatory Concerns Prompt Deal Restructuring
CK Hutchison emphasised that changes to the consortium’s composition and the deal’s structure would be required to secure regulatory approval. “The company has stated on several occasions that it will not proceed with any transaction that does not have the approval of all relevant authorities,” CK Hutchison said in a filing to the Hong Kong Stock Exchange.
Company Open to New Bidders
CK Hutchison is now open to bids from other interested parties, as the exclusivity period has come to an end, according to a source familiar with the situation. This individual, who wished to remain anonymous due to media restrictions, mentioned that the company would refrain from commenting beyond what was stated in its official exchange filing.
Political Context: U.S. Interest in Canal Control
The deal has gained attention following former U.S. President Donald Trump’s calls for the Panama Canal to be returned to U.S. control. Trump previously hailed the deal as “reclaiming” the Panama Canal, in response to concerns over Chinese ownership of ports along the canal. Both Panama and China responded strongly to Trump’s comments, while the White House has not provided any comments on the matter.
China Initiates Regulatory Review
China’s State Administration for Market Regulation has announced that it will conduct a review of the deal to ensure it aligns with laws aimed “to protect fair competition and safeguard public interests.” The regulator has not provided any additional comments.
State Media Critiques Deal Structure
Chinese state-backed media, which often reflect the government’s stance, have criticised the deal, arguing that China has vital national interests at stake in any such agreement. They further asserted that “pursuit of the deal as it stands would be an act of betrayal.”
New Investor Must Be “Significant” Stakeholder
CK Hutchison stated that any new investor in the consortium must be a “significant” member. Strategist David Blennerhassett from Ballingal Investment Advisors commented, “This is an interesting development. A PRC (China) investor with majority control of the consortium sounds like a non-starter in my view. An investor with a less than 50% stake you would think should keep everyone happy.”
COSCO May Ease Regulatory Concerns
JPMorgan pointed out that bringing COSCO into the consortium might help alleviate some of the regulatory worries from China and boost the likelihood of getting the green light. However, they also cautioned that the mix of buyers and the final pricing could shift, especially if the two Panama ports end up being left out of any updated agreement due to geopolitical tensions.
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Source: Reuters
