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Chief Writer | Li Ping

Li Ka Shing's CK Hutchison (00001.HK) has embarked on a significant asset sale spree.

On the evening of March 4, CK Hutchison (00001.HK) announced that it would sell its port assets to the BlackRock consortium, expecting to generate over $19 billion in cash proceeds for the group.

In this deal, CK Hutchison will offload a 90% stake in Panama Ports Company (PPC) to the BlackRock consortium.

Upon completion, the BlackRock consortium will effectively control approximately 10.4% of global container terminal throughput, ranking among the top three port operators globally.

Known as a leading player among the world's top three consortia, BlackRock boasts a vast asset base of $11.5 trillion. Why is this enterprise eyeing ports, including Panama?

01

CK Hutchison to Receive $19 Billion in Cash

On the evening of March 4, Li Ka Shing's CK Hutchison announced on the Hong Kong Stock Exchange that the company had reached a principle agreement with the BlackRock-led consortium on the preliminary basic terms of the transaction.

Specifically, CK Hutchison intends to sell all its shares in Hutchison Ports Holdings (HPHS) and Hutchison Ports Group Holdings (HPGHL) to the consortium, which collectively control 80% of the global equity interests of Hutchison Ports Group. The target assets include 43 ports across 23 countries in Asia, Europe, and the Americas, encompassing 199 berths and supporting core resources such as intelligent terminal management systems and global logistics networks. Additionally, CK Hutchison will sell a 90% stake in Panama Ports Company (PPC) to the BlackRock consortium.

The announcement revealed that the total asset value of this transaction is approximately $22.765 billion, with an equity value of approximately $17.765 billion. The value corresponding to the sale of an 80% stake is $14.212 billion, and CK Hutchison anticipates generating over $19 billion in cash proceeds from this deal.

It's worth noting that the sold assets do not include ports operated by Hutchison Ports Trust in Hong Kong and Mainland China, such as Yantian International and Hong Kong International Terminals, which are strategic assets. The transaction involving Panama Ports Company is subject to confirmation by the Panamanian government regarding the proposed acquisition and sale terms.

Upon this announcement, CK Hutchison is expected to reverse its declining profitability trend, and its share price soared accordingly.

Data shows that in the first half of 2024, CK Hutchison's total revenue was HK$232.644 billion, a year-on-year increase of 3.92%; total EBITDA was HK$63.422 billion, a year-on-year increase of 3.71%; and reported profit was HK$10.205 billion, a year-on-year decrease of 9%.

On March 5, Li Ka Shing's CK Hutchison Holdings Limited (abbreviated as "CK Hutchison", 0001.HK) saw its share price surge, with intraday gains exceeding 24% at one point.

By the close of trading on March 5, CK Hutchison's share price stood at HK$47.01, up 21.86%, with a turnover of HK$5.397 billion and a total market capitalization soaring to HK$180.4 billion.

Some believe that for CK Hutchison, the substantial cash proceeds obtained will provide ample funds for its subsequent strategic layout. These funds can be utilized to repay debts, reduce leverage, and further stabilize the financial situation. Alternatively, they can be invested in core businesses or emerging fields with higher returns to enhance the group's overall profitability.

A recent research report by JP Morgan pointed out that the Panama port business minimally contributes to CK Hutchison, with EBITDA (earnings before interest, taxes, depreciation, and amortization) from this region in the first half of 2024 accounting for less than 1% of the group's total value and only 3.9% of throughput in the port business segment. From a financial perspective, while the port business is the third largest main business of CK Hutchison Group with stable profits, the port business outside Greater China achieved revenue of HK$17.8 billion and EBITDA of HK$6.25 billion in the first half of last year. However, with this large-scale sale of port assets, CK Hutchison aims to optimize its asset-liability structure. The announcement stated that the estimated net debt ratio will fall from 23.6% to below 18% upon completion of the transaction.

UBS believes that if the transaction is ultimately implemented, it is expected to have a highly positive impact on the share price as the $19 billion in cash proceeds will exceed the current market capitalization. As the stock is currently valued at only 0.23 times its estimated book value for this year, the potential for share price appreciation may hinge on how much is returned to shareholders. The bank is awaiting management's comments on the utilization of the proceeds.

02

BlackRock Joins the Ranks of the World's Top Three Port Operators

As the "buyer," what is BlackRock's background?

The BlackRock consortium, also known as BlackRock Group, was founded by Larry Fink (or Laurence D. Fink) in 1988 with an initial team of eight Jews, headquartered in Manhattan, New York, USA.

Larry Fink, famously known as the "Godfather of Wall Street," is of Jewish descent.

In its early days, BlackRock was a bond investment institution with assets of only $1 billion, existing as "BlackRock Financial Management Inc.," an asset management subsidiary of Blackstone Group (Black Stone).

In 1992, BlackRock began operating independently. In 1994, due to disagreements over compensation and equity distribution, BlackRock separated from Blackstone Group, and Blackstone Group transferred its stake in BlackRock to PNC Financial Services Group.

In 1999, BlackRock was listed on the New York Stock Exchange and independently developed the core system Aladdin, providing technical support for global investment operations.

Entering the 21st century, BlackRock rapidly expanded its business scale and influence through a series of acquisitions and mergers. For instance, it merged with Merrill Lynch Investment Managers (MLIM) in 2006 and acquired Barclays Global Investors for $13.5 billion in 2009.

On January 12, 2024, BlackRock announced the acquisition of Global Infrastructure Partners (GIP) for a consideration of nearly $12.5 billion.

Currently, BlackRock's business scope encompasses multiple fields such as equities, fixed income investments, cash management, alternative investments, real estate, and advisory strategies, providing diversified asset management services to clients in over 100 countries and regions worldwide.

BlackRock also established BlackRock Investment Management (Shanghai) as a private equity fund in 2017 and was approved in August 2020 to become the first wholly foreign-owned public fund management company in China. Additionally, BlackRock Jianxin Wealth Management, jointly established by BlackRock and other institutions, opened in May 2021, further consolidating BlackRock's position in the Chinese market.

On March 3, Hong Kong Exchange data revealed that BlackRock increased its holdings in Industrial and Commercial Bank of China, ZTE Corporation, and AIA Group Limited on February 25.

Specifically, BlackRock's shareholding in Industrial and Commercial Bank of China increased from 4.99% to 5.07%, in ZTE Corporation from 4.83% to 5.11%, and in AIA Group Limited from 5.94% to 6.13%.

It's worth mentioning that on January 9, 2025, BlackRock sent a letter to its institutional clients stating that it had withdrawn from the Net Zero Asset Managers Initiative.

From the perspective of the transaction with CK Hutchison, it will significantly impact the global port operations industry landscape. Upon completion, the BlackRock consortium will effectively control approximately 10.4% of global container terminal throughput, ranking among the top three port operators globally.

According to market rumors, Trump promised to retake the Panama Canal on his first day in office.

Informed sources revealed that a few weeks later, BlackRock CEO Fink had a phone call with the White House, and it is known that BlackRock is interested in acquiring ports on both sides of the canal and transferring them to American hands.

However, in a statement, Simon Sixt, Co-Managing Director of CK Hutchison Holdings, clarified that the company had received multiple acquisition offers and that this transaction was "purely commercial and had nothing to do with recent political news."

END

Editor | Xiao'er

Typesetting | Wu Yue

Chief Editor | Lao Chao

Images sourced from the internet