CK Hutchison announced on Monday that it is in talks with a major Chinese strategic investor to join the consortium interested in acquiring its port operations, in a transaction estimated at $22.8bn. This development comes after Beijing launched an investigation into the deal amid growing geopolitical tensions between China and the United States.
The Hong Kong-based conglomerate confirmed this move the day after the end of the exclusivity period with the consortium led by US giant BlackRock and Italian-Swiss shipping company MSC, owned by the Aponte family. The parties had signed a preliminary agreement in March covering 43 ports in 23 countries, including two located along the strategic Panama Canal. According to a source close to the matter, Chinese operator China COSCO Shipping Corp is now considering joining the consortium.
The consortium is set to be restructured
On the Hong Kong Stock Exchange, CK Hutchison shares rose 1.6% on Monday, outperforming the Hang Seng Index (+0.9%).
In a statement released to the stock exchange, CK Hutchison said that changes to the consortium's composition and the structure of the transaction would be necessary to obtain regulatory approvals. The group stressed that it would not complete any sale without approval from all relevant authorities.
A source close to the matter said that the company is now open to other proposals, as the exclusivity clause has expired.
A highly sensitive geopolitical issue
Developments in this case are leading to significant uncertainty, as the transaction was perceived as geopolitically sensitive. US President Donald Trump had hailed the agreement as an attempt to "reclaim" the Panama Canal, calling for an end to what he considers Chinese presence in Panamanian ports. This stance was strongly criticized by both China and Panama.
In China, the State Administration for Market Regulation confirmed that it would investigate the case in accordance with the law to ensure fair competition and protect the public interest. In a tense climate, Chinese state media described the transaction as a potential betrayal if it went ahead without taking China's strategic interests into account.
A delicate balance to strike
CK Hutchison has stated that any new investor would have to play a "significant" role in the consortium. According to David Blennerhassett, strategist at Ballingal Investment Advisors, a majority Chinese investor would be difficult for the other parties to accept. However, a minority stake could satisfy everyone's requirements.
In a note to its clients, JPMorgan said that COSCO's entry into the consortium could ease Beijing's concerns and facilitate regulatory approval. The US bank nevertheless warned that some ports, notably those on the Panama Canal, could be excluded from the final version of the agreement due to geopolitical tensions. The structure of buyers could also be revised, which would potentially change the final price of the transaction.
