Chinese conglomerate seeks significant stake in Panama port operations
In a development that may strengthen investor confidence in the deal's viability, ongoing negotiations have reportedly eased concerns over Chinese regulatory hurdles. According to Bloomberg Intelligence analyst Denise Wong, the inclusion of China COSCO Shipping Corporation (Cosco) in the consortium is seen as a move to address Chinese regulatory concerns.
CK Hutchison, the company operating ports at both ends of the Panama Canal, has been in discussions with consortium members to invite a major strategic investor from mainland China. Although the investor's identity has not been officially named, multiple sources have identified Cosco as the most likely candidate.
The potential inclusion of Cosco, China’s biggest shipping company, would see it join as a significant member of the consortium, with possible veto rights or equivalent powers as part of the deal structure. The consortium currently includes BlackRock’s Global Infrastructure Partners and Terminal Investment Limited, the latter being an affiliate of Italian billionaire Gianluigi Aponte.
However, it is important to note that the deal is not yet finalized, with regulatory approvals still pending. The current structure and negotiations are ongoing, and changes may be necessary for approval by all relevant authorities.
The initial structure of the consortium was designed to pass control of CK Hutchison's two Panama ports to BlackRock's Global Infrastructure Partners unit, while the remaining ports would go to Terminal Investment Limited. However, the exclusive negotiation period mentioned in the March announcement has expired, and discussions are still continuing.
The sale of CK Hutchison's port operations, including those in the Panama Canal, was announced in March for $19 billion in cash. The sale was viewed as a political victory for US President Donald Trump due to his vow to "take back" the Panama Canal from alleged Chinese control.
The Panama Ports Company, a CK Hutchison subsidiary, has managed the port of Cristobal on the canal's Atlantic side and Balboa on the Pacific side since 1997, via a concession from the Panama government.
As the negotiations continue, it is crucial to remember that all parties involved will need to ensure that any changes to the consortium's membership and deal structure are in compliance with all relevant authorities. CK Hutchison has stated that it will not proceed with any transaction that does not have the approval of all relevant authorities.
In response to these developments, Cosco's shares dropped 2.85 percent on Monday, while CK Hutchison's Hong Kong-listed shares fell 0.84 percent on the same day. The Chinese foreign ministry spokesman Guo Jiakun stated that Beijing will "carry out supervision in accordance with the law, firmly safeguard national sovereignty, security and development interests, and maintain a fair and just market."
Gary Ng, senior economist for Asia Pacific at Natixis, commented that "business deals can be increasingly subject to politics in the new economic and geopolitical reality." As these negotiations continue, it will be interesting to see how they unfold and what implications they may have for both parties involved.
References: 1. newsroompanama.com 2. South China Morning Post 3. Hong Kong Free Press 4. Japan Times
- The potential involvement of China COSCO Shipping Corporation (Cosco) in the consortium, as a significant member with possible veto rights, could impact both the business and political aspects of the deal, as suggested by Gary Ng, senior economist for Asia Pacific at Natixis.
- The ongoing negotiations between CK Hutchison and consortium members, especially regarding the inclusion of Cosco, may have significant implications for finance and general-news, given the potential conflicts between national interests and regulatory requirements, as observed by Beijing's foreign ministry spokesman Guo Jiakun.
