EMEA: Macquarie readies major port sale

02 August 2018 - 12:00 am UTC

Macquarie has launched a strategic review of its deepwater container port concession in Poland, with a sale valued at up to EUR 1.4bn expected to launch in weeks, Inframation understands.

The Australian manager, which owns a 63.8% stake via its Global Infrastructure Fund II (GIF II), has hired Goldman Sachs and Clifford Chance’s Warsaw office as its advisors for the long-awaited potential sale of DCT Gdansk.

Two industry sources valued the business at a 14-15 times EBITDA multiple, although Macquarie is seeking a multiple of 15-20 times, sources with knowledge of the process said. 

DCT Gdansk’s 2017 EBITDA totaled around EUR 60m and forecast year-end 2018 EBITDA is EUR 70m, it is understood.

Port multiples are relatively frothy at present, with a majority stake in Noatum Ports, a container port business based in Spain, last year trading at almost 40 times EBITDA, according to Inframation data.

 

Macquarie’s GIF II, which is in divestment mode as it matured in 2016 and so far has had two one year extensions, is likely to sell alongside DCT’s other shareholders, MTAA Superannuation Fund (18%), Statewide Superannuation Fund (9%), and Westscheme Fund (9%), sources said. GIF II targets pre-tax IRRs of 15%. 

One source with knowledge of the deal expects the sale to launch in September and complete before year-end, while another insider said it may take up to six months to launch. Macquarie declined to comment.

The asset, which specialises in handling ultra-large container vessels shipping goods between the Far East and Europe, has begun to see the benefit of a EUR 200m terminal launched in 2016. Its key customers include Maersk, MSC, COSCO Shipping, Evergreen Line, CMA CGM, and OOCL.

Last year it handled 1.5m twenty-foot equivalent unit (TEU) – a standard unit for measuring cargo – up from 1.2m TEU in 2016. It processed 496 container ships last year against 388 in 2016.

Cameron Thorpe, the DCT Gdansk’s CEO, told Inframation in an interview last year that “the port grew around 20% in 2017 and we expect a similar range in 2018, [and from] then continued double-digit growth.” 

Multiple sources said they expect port operators such as China Ocean Shipping Company (COSCO), PSA International, APM Terminals and Eurogate to bid, given their growing interest in strategically important port assets. 

State-owned COSCO last year acquired a 51% stake in Noatum Ports from funds managed by JP Morgan Asset Management and Dutch investor Stichting Pensioenfonds ABP, and in 2016 bought a 67% stake in Piraeaus Port from the Hellenic Republic Asset Development Fund. 

COSCO Shipping operates a portfolio of 270 berths at 35 ports across mainland China, Southeast Asia, Middle East, Europe and the Mediterranean through COSCO Shipping Ports. China is focused on growing its ports portfolio as part of its USD 900bn one belt, one road initiative launched by President Xi Jinping in 2013.

Infrastructure funds and institutional investors are also expected to bid as they seek to deploy their growing war chests.

Competition
The sale price will be lower than freehold ports because DCT operates as a 30-year concession expiring in 2034.

It also faces growing pressure from Klaipėdos Smeltė Terminal in Lithuania, which is part-owned by Terminal Investment Limited, in which GIP and co-investors own a minority stake.

Like GCT, Klaipėdos handles cargo on Asian ships bound for Europe and hopes to next year complete construction of a terminal capable of handling 13,000 TEU ships.

Also, DCT Gdansk’s volumes have declined occasionally in the past due to a decline in Russian trade, including in 2015 when they dropped 18.6 year-on-year.

The DCT strategic review takes place amidst a flurry of M&A activity in the infrastructure fund-owned port sector, with final bids due shortly for the sprawling bulk and breakbulk specialist Euroports owned by Antin, Brookfield and Arcus, and DWS’ (formerly Deutsche Asset Management) potential sale of its Port of Lubeck in Germany.

DCT, which is currently investing EUR 50m over three years to improving the efficiency of the rest of the port, including cranes, rail links and digitization, is the dominant container terminal business in Poland with a 63% market share. Its large customer hinterland stretches from Russia to the Baltics and across central eastern Europe as far south to Austria.

DCT Gdansk’s turnover rose 26.2% year-on-year in 2017 to EUR 98m, while net profit grew EUR 7m to EUR 22.6m. The company attributed this to an increase in container handing volumes and improvement of handling volume structures.

Macquarie