Hutchison Confirms Chinese Talks to Rework Sale of Its Terminal Portfolio

CK Hutchison issued a brief stock exchange announcement on Monday, July 28, confirming what had been expected: the exclusivity agreement has expired with BlackRock and MSC’s Terminal Investment (TiL). The expiration of the exclusive negotiations for the sale of the terminals in 43 ports in 23 countries clears the way for the terms to be reworked to be more acceptable to the Chinese, who have threatened to block the sale.

“Changes to the membership of the consortium and the structure of the transaction (the New Arrangements) will be needed for the transaction to be capable of being approved by all relevant authorities,” the company writes in the filing. It reiterates previous statements that it “will not proceed” with any transaction that does not have the approval of all relevant authorities.

Hutchison reports that it “remains in discussions,” with the consortium saying it is with a “view to inviting a major strategic investor from” China to join as a “significant member” of the consortium. Hutchison declined to say if it is in discussions with a Chinese company, or to identify the company, which media reports have speculated is COSCO, which already has a large global portfolio of terminal operations.

It was widely reported that China had set as a precondition to approval of the deal the participation of COSCO with a role to block any actions that could be detrimental to Chinese interests. The Hong Kong government has said it would seek to review the deal, while China’s State Administration for Market Regulation is also said to be reviewing the sale.

CK Hutchison announced two parallel deals in March with BlackRock and TiL. BlackRock was to lead the deal to acquire the company in Panama that operates terminals at each terminus of the Panama Canal. A separate deal called for the sale of the global terminal portfolio, except the operations in China and Hong Kong, to the consortium with TiL believed to be the primary investor. The deals were valued at $22.8 billion.

It is widely believed that COSCO would join as a third investor in the deals, permitting China to save face and allaying fears that the sale would be detrimental to China’s economic trade. Reuters, however, quoting unnamed sources, says that with the exclusive period expired, CK Hutchison would be open to “bids from other parties.”

While saying there can be no certainty that a new arrangement would be reached, Hutchison says it “intends to allow such time as it requires for such discussions to achieve the new arrangement. Bloomberg had previously speculated that new terms could be reached within a month, giving COSCO the role required to gain China’s acceptance.

The Trump administration has not commented after previously saying the U.S. was regaining control over the Panama Canal. Hutchison has operated terminals in Panama since 1997 and recently won a no-bid long-term renewal of its concession. Separately, the new government in Panama has threatened to review the concession, while it has also taken steps to distance Panama from China to placate pressures from the Trump administration.