Hong Kong-listed Orient Overseas International Ltd (OOIL) is set to kick off the sale process of its Long Beach container terminal on the US west coast next month in a multibillion-dollar deal that is likely to attract mainly North American private equity, pension funds, and other financial investors.
The sale could be one of the largest terminal deals ever, dwarfing the USD2.4 billion sale of OOIL’s terminals on the US east coast and in Vancouver, Canada, in 2006.
OOIL box line subsidiary Orient Overseas Container Line (OOCL) only agreed a 40-year, USD4.6 billion lease for the Middle Harbour terminal in Long Beach, California, in 2012.
“Terminal giants will follow the sales process when it starts next month but it will be pension funds, investment companies etc who will make the investment,” a financial adviser with knowledge of the deal told IHS Markit.
The current management team is likely to be kept on by the new owner, the insider said whose views were echoed by Tim Smith, Asia-Pacific head of Maersk’s terminal company.
Smith, who was previously chairman of Maersk China before taking up his APM Terminals (APMT) role in March, also ruled out any Maersk interest in buying OOCL’s Long Beach terminal.
“[There is] no APMT interest in OOCL’s Long Beach terminal. We already have all that we need at our existing Pier 400 terminal,”Smith told IHS Markit.
“I believe it will be pension funds and financial institutions that principally would be interested in OOCL’s facility.”
Insiders said JP Morgan has been appointed by OOIL as the sole financial adviser on the Long Beach deal. JP Morgan was also OOIL’s financial adviser when COSCO Shipping Holdings and Shanghai International Port Group made their cash offer to buy OOIL/OOCL in July 2017.
OOCL agreed to sell its Long Beach terminal while the US government’s Committee on Foreign Investment In The United States (CFIUS) was reviewing OOIL’s USD6.3 billion takeover by China’s COSCO Shipping Holdings earlier this year.
COSCO signed a national security agreement with the United States on 6 July agreeing to sell the Long Beach facility.
There had been concern that CFIUS, which includes representatives from US government departments including defence and oversees US national security interests, would block the COSCO-OOIL deal unless the terminal is sold.
As it is, CFIUS is taking a keen interest in the terminal’s sale process. Hence, the likelihood North American investors would be preferred.
Canada’s Ontario Teachers’ Pension Plan (OTPP), which agreed to pay OOCL’s Hong Kong-listed parent, OOIL, USD2.4 billion to acquire four OOCL terminals in New York, New Jersey, and Vancouver in November 2006, would not comment on whether it was interested in buying the Long Beach terminal.
“As expected, we have no comment,”OTPP spokesman Pav Jordan told IHS Markit.
OTPP, which has an office in Hong Kong, is one of the world’s largest institutional investors with total assets of about CAD189.5 billion.
OOCL carried out an open competitive tender for the sale of its New York, New Jersey, and Vancouver terminals that OTPP subsequently won. One of the conditions of the sale was that CFIUS give written undertakings to OOIL that it would not investigate the OTPP transaction or that the US president at the time would not intervene.
Another major Canadian investment firm, Toronto-based Brookfield Asset Management, did not respond to inquiries by IHS Markit.
OOCL spokesman Mark Wong confirmed that the sale of the Long Beach terminal is progressing but would not comment further.
“The sale of the Long Beach Container Terminal is still indeed a work in progress. At this time, we have no further updates regarding the sale,”he told IHS Markit.
OOCL subsidiary Long Beach Container Terminal is operating the Middle Harbour facility. The first two phases opened in 2016, although overall completion of the terminal, which is being built by the Port of Long Beach, is not expected until 2020 when it will cover about 124 ha and have a capacity to handle 3.3 million teu.