OOIL sells 4 port assets for HK$14b
Shipping giant disposes of North American container terminals to Brookfield Asset Management
Orient Overseas (International) Ltd, owned by the family of Tung Chee-hwa, yesterday cashed in on global demand for container port assets by selling four terminals in North America to Brookfield Asset Management of Toronto for more than HK$14 billion, according to banking and industry sources.
They said the Canadian private equity firm, one of the three firms in the final round of bidding, agreed to pay US$1.8 billion to US$1.9 billion for the terminals in New York, New Jersey and Vancouver, Canada.
Also short-listed were the Macquarie Infrastructure Group and RREEF, the real estate and infrastructure investment arm of Deutsche Bank.
It is understood that Brookfield is an agent for Teachers' Private Capital, the investment arm of the C$96 billion (HK$582.72 billion) Ontario Teachers' Pension Plan.
The winning bid represents a valuation of 16.8 to 17.7 times the projected US$107 million in earnings before interest, tax, depreciation and amortisation (ebitda) for the four terminals, according to DBS Vickers.
OOIL's ports division, which includes operations in California's Long Beach, Ningbo and Tianjin in the mainland and Kaohsiung in Taiwan, posted ebitda of US$99.8 million in the year to June, chief financial officer Nicholas Sims said on August 4.
Recent heightened interest in global port assets from fund managers has driven asking prices to record highs and spurred a flurry of disposals.
A division of Macquarie last month said it would buy Canada's Halterm Income Fund, whose main asset is a container terminal in Halifax, Nova Scotia, for about C$173 million, representing a forward ebitda multiple of 18 times, said a banker with knowledge of the deal.
RREEF this month finalised the #750 million (HK$11.12 billion) acquisition of a 49 per cent stake in Peel Ports, Britain's second-largest port group. Peel Ports posted ebitda of #100 million for the year to March, suggesting a historical multiple of 15 times for its sale.
Analysts suggested the sale of US port assets may have an appeal to fund managers beyond the lure of entering the world's biggest economy. US security concerns preclude many of the world's biggest terminal developers from bidding for its strategic assets.
It is believed Hutchison Port Holdings, Singapore's PSA International, Dubai's DP World and Cosco Pacific did not enter the OOIL sell-off due to challenges they would have faced getting bids past the scrutiny of US regulators.
OOIL said in August it would sell the port assets to extract value the company believed its share price did not accurately reflect.
Yesterday's deal raised the probability of a bid for its core earning vehicle, Orient Overseas Container Line (OOCL), according to banking sources.
'Shipping lines don't necessarily want to buy port assets and [OOCL] is much cleaner to buy now,' said one banker with knowledge of the sector. 'It also raises the question of what they will do with the money. If they [pay out dividends], the Tung family will get two-thirds.'
OOCL executives did not respond to inquiries yesterday. Macquarie and Deutsche Bank sources did not comment. Brookfield executives could not be reached.
OOIL shares were suspended yesterday pending a 'very substantial disposal' after closing on Tuesday at HK$36.95, up 33 per cent since the assets were put on sale.
