Report: COSCO Seeks Share of Hutchison Deal Addressing China’s Fears
A new report is suggesting that China’s COSCO Shipping is negotiating for a role as an investor in the deal to acquire the terminal operations of CK Hutchison. Bloomberg first reported that a group of Chinese investors is in discussions with MSC’s Terminal Investments and BlackRock about participating in the $23 billion deal for the terminal operations in 41 ports around the world.
China has strongly objected to the deal and primarily the parallel portion that sells the operation of terminals at both ends of the Panama Canal. Billionaire Li Ka-shing who controls CK Hutchison has long been at odds with the communist government and with the announcement of the deal China said it was a betrayal of the nation. It sees the agreement to sell the operations in Panama to BlackRock as a threat to Chinese trade and being done to appease Donald Trump and his assertions that “China runs the Panama Canal.”
The two deals have also come under scrutiny from various parts of the shipping industry which cites MSC’s growing domination. Panama officials told the Financial Times that the concentration of terminal ownership could threaten the promised neutrality of Panama’s operations. Well-known industry analyst Drewry also highlights that TIL would become a dominant force in port operations. TIL says on its website that it operates more than 70 terminals worldwide in 31 countries and handles more than 65 million containers annually. MSC has also become the sole investor in the Port of Hamburg (Germany) with the city.
CK Hutchison announced at the beginning of March that it had entered into exclusive negotiations with the BlackRock investment group for the terminals in Panama as well as its portfolio of properties worldwide except for Hong Kong and the Chinese mainland. The outline of the deal called for the sale of 80 percent ownership of CK Hutchison’s portfolio of 43 global ports (199 berths in 23 countries) and in a parallel agreement 90 percent ownership of Panama Ports Company, which operates the terminals in Balboa and Cristobal, Panama. It later came out that TIL was negotiating for as much as 70 percent ownership of the international portfolio with BlackRock holding just 20 percent and 10 percent retained by CK Hutchison.
China has said it would be reviewing the deal to ensure it followed the rules although it has no official oversight role. Restructuring to add a portion of the investment from COSCO and possibly other Chinese companies could be seen as a face-saving move for the Chinese government. COSCO is a logical company to lead the Chinese portion as its COSCO Shipping Ports as of December 31, 2024, operated and managed 375 berths at 39 ports globally, of which 226 were for containers, with an annual handling capacity of approximately 124 million TEU.
Bloomberg points out that the exclusive agreement between Hutchison and the BlackRock/TIL group was for 145 days meaning it is due to expire in late July. They could agree to extend the exclusive agreement or it could open the door for alternate bids. Hutchison and BlackRock had said they were targeting signing definitive agreements on or before April 2.