China Merchants Port seeks sovereign funds for overseas buys

03 April 2019 - 12:00 am UTC

China Merchants Port is interested in teaming up with sovereign wealth funds and international shipping companies to invest in ports overseas, according to the state-run company’s Managing Director, Bai Jingtao.

The Hong Kong-based conglomerate, which controls the Port of Newcastle in Australia and TCP in Brazil, is now looking at Southeast Asia, Africa and Europe, Bai Jingtao said at a 1 April post-earnings briefing. Projects in Southeast Asian countries such as Malaysia, Myanmar, Cambodia and the Philippines are preferred, Bai said.

“We like markets with faster economic growth,” Bai said, adding however that it is difficult to find assets that have strategic locations in these regions because many of these are government-controlled.

The company will primarily opt for projects that can serve as gateway ports and regional transportation hubs, he said, adding that co-investments with major clients such as shipping companies will help achieve synergies.

China Merchants is also now interested in Italian ports, after the country recently became the first G-7 member to join China’s trillion-dollar Belt and Road programme, China Merchants Port Vice-President Erik Yim told Inframation.

Italian Prime Minister Giuseppe Conte on 23 March signed an MOU with Chinese President Xi Jinping to endorse the Belt and Road scheme, which was launched in 2013 by Beijing to boost trade and infrastructure links in countries across Eurasia. State-owned China Communications Construction Company (CCCC) signed two cooperation agreements with the authorities of ports in Trieste and Genoa days later.

For upcoming acquisitions, China Merchants Port will look at projects with an estimated return on equity of around 10%, Yim said.

The Hong Kong-based port operator is among more than 30 companies that have shown interest in a PPP to build and operate a container terminal at Thailand’s Laem Chabang port that is estimated to cost at least THB 30bn (USD 959m). Other interested Chinese companies include CCCC and its subsidiary China Harbor Engineering, as well as CRCC. It has also put in a bid for an Indonesian port project, Yim said. 

The Chinese port giant usually tends to monitor more than two dozen potential deals worldwide. It normally takes two to three years for a significant transaction, such as the TCP acquisition, to be settled. While the company will focus on majority stake acquisitions, it will not rule out minority stake purchases, a spokesperson said in February.

China Merchants Port, which has a market capitalisation of HKD 56.54bn (USD 7.2bn), is involved in projects in France, Belgium, Turkey, Morocco, and Malta across Europe, according to stock exchange disclosures.

 

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