Orient Overseas may raise US$1b selling ports

Orient Overseas (International) Ltd, Hong Kong's No 3 container shipping line, may raise about US$1 billion selling ports in North America, taking advantage of rising prices, three people familiar with the plan said.

Orient Overseas said last week it is considering selling its terminal on Staten Island, New York, one in New Jersey, and two in Vancouver. Goldman Sachs Group Inc forecast the four ports would earn US$107 million a year excluding expenses such as interest and taxes, according to a July 25 research report.

Growth in shipping spurred Singapore's PSA International Pte and Dubai's DP World to spend US$11.2 billion buying docks in the six months to June 30. The International Monetary Fund expects global trade to expand 7.6 per cent this year.

"The port assets aren't cheap but you still see interested buyers," said Michael Chan, a Hong Kong-based analyst at Macquarie Securities Ltd. "The global trade outlook is still very rosy and the overseas ports are under-invested."

Goldman Sachs Group Inc, Macquarie Group and Babcock & Brown Infrastructure Group, owner of Australia's second-biggest coal-export terminal, are among the potential bidders for the assets of Orient Overseas, the sources said.

The Hong Kong shipping company, owned by the family of Hong Kong's former Chief Executive Tung Chee-hwa, may compete for buyers with Fraser Surrey Docks L.P. The firm is separately selling its Vancouver-based terminal in a deal expected to raise between US$120 million and US$150 million, the sources said, asking not to be identified before an announcement is made.

Orient Overseas is asking for offers in the week of August 20, the sources said. The company plans to ask for the second round of bids in October after short-listing the bidders, they said.

Orient Overseas hired UBS AG to advise on the sale.

Matthew McGrath, a Hong Kong-based spokesman at UBS, declined to comment. Hui Yuk-min, a Hong Kong-based spokeswoman at ABN Amro Holding NV, which is advising on Fraser Surrey's sale, declined to comment.

Stanley Shen, a spokesman for Orient Overseas in Hong Kong, declined to comment.

Edward Naylor, a Hong Kong-based spokesman at Goldman, declined to comment. Lotte Pang, Macquarie's Hong Kong-based spokeswoman, and Babcock & Brown's Sydney-based spokeswoman Kelly Hibbins also declined to comment.

Shanghai Port Container Co, a unit of China's largest port operator, is trading at 12 times its earnings before interest, taxes, depreciation and amortization. AB Ports, Britain's biggest port company, is trading around 13 times. Port of Tauranga Ltd, New Zealand's biggest export port, is trading about 13 times, according to Bloomberg data.

At 12 times earnings before those items, Orient Overseas assets would be valued at US$1.28 billion.

Fraser Surrey Docks, founded in 1964, handled 370,000 20-foot-equivalent units, a standard container for shipping, and 1.1 million metric tons of steel, lumber and other raw materials last year.

The terminal has attracted at least six bids from port operators in the US, Canada and Asia and other financial companies, the sources said.

Financial companies and port operators are snapping up assets in expectation of a growth in demand for terminals on the United States' West Coast, fuelled by US consumption of manufactured goods exported from China and raw-material demand in Asia. About 80 per cent of global trade is transported by sea.

Goldman Sachs last month won regulatory approval to buy Associated British Ports Holdings Plc after Macquarie Bank Ltd quit a contest that drove the price of the UK's biggest port owner to 2.8 billion pounds (US$5.2 billion).

The price is 31 per cent more than AB Ports was valued at before bidding began on March 27. The contest was the third for a British port operator since December.

Singapore's PSA International Pte, the world's second-largest port operator, agreed in April to pay US$4.4 billion for 20 per cent of Hong Kong billionaire Li Ka-shing's port unit. The price represents 13 times the earnings before interest, taxes, depreciation and amortization, according to Goldman's research.

DP World bought Peninsular & Oriental Steam Navigation Co for US$6.8 billion in February and was forced to sell the British company's interest in six US ports after US lawmakers threatened to block the takeover, saying it would be a threat to national security.

Political opposition to the sale in the US may deter bids by Middle Eastern and Asian port operators. That may restrict the price to between US$800 million and US$1 billion, the sources said.

Source: China Daily