Li Ka-Shing Boosts Hong Kong Bet With DP World Terminals

Hutchison Port Holdings Trust, backed by Li Ka-shing’s port operator, bought a Hong Kong box terminal from DP World Ltd. and a partner as the billionaire bets on rising trade in the south China region.

Hutchison Port will pay HK$3.2 billion ($413 million) in cash to buy the entire stake in Asia Container Terminal Ltd. from DP World and a unit of PSA International Pte, it said in a statement yesterday. DP World also sold some other assets in Hong Kong to raise a total of $742 million, the Dubai-based company said in a separate statement.

The acquisition will help Li’s Hutchison dominate the Hong Kong port, the world’s third-busiest container facility, while the sale will generate funds for DP World to expand in other markets. The port business of Li, 84 and nicknamed “superman” by the local media for his investing prowess, reported a 15 percent gain in pretax earnings in the first half of last year and said it will look for expansion opportunities.

“For Hutchison, the deal can help reduce a competitor in Hong Kong and increase its market share,” said Lawrence Li, an analyst at UOB-Kay Hian Holdings Ltd. “In a well-developed market like Hong Kong, acquisition is the way for market consolidation as opportunities for organic growth is gone.”

Plastic Flowers

After the deal, Hutchison and its partner Cosco Pacific Ltd. will control 64 percent of capacity in Hong Kong, up from 55 percent, according to Li. Shanghai was the world’s busiest container port last year and Singapore the second-busiest.

Hutchison Port Holdings Trust was unchanged at 79 cents in Singapore trading. Hutchison Whampoa Ltd., the largest shareholder of the trust, gained 1.2 percent to HK$84.95 in Hong Kong trading.

Billionaire Li, who opened a plastic flower factory after World War II, began investing in Hong Kong real estate in 1967 after riots from China’s Cultural Revolution depressed prices to build Cheung Kong (Holdings) Ltd. into a company with a market value of $35 billion.

His Hutchison Whampoa, the world’s second-biggest container port operator, owns 28 percent of Hutchison Port Holdings, according to data compiled by Bloomberg. Hutchison Port handled 22.9 million 20-foot boxes last year at its facilities in Hong Kong and Shenzhen, 5 percent more than a year earlier. It is also developing additional berths in the South China port.

Goodman Fund

The acquisition is “positive” for Hutchison as the additional capacity could help ease operational pressure since its existing berths are almost fully loaded, Deutsche Bank AG analysts Sky Hong and Joe Liew said in a note to clients dated yesterday. It will also be “accretive” to Hutchison’s earnings and cash flow, they said.

Asia Container Terminal owns and operates a terminal that has two berths and is located next to the two berths operated by the venture between Hutchison and Cosco, according to the analysts.

As part of the deal, DP World, the world’s third-largest container port operator, sold a 55.2 percent stake in Asia Container Terminals to Hutchison Port for $279 million. It also offloaded 75 percent of its stake in CSX World Terminals Hong Kong Ltd. and ATL Logistics Centre Hong Kong Ltd. to Goodman Hong Kong Logistics Fund for $463 million.

Dubai World

“DP World has exited some non-core assets over the past couple of years,” Samir Murad, an analyst at NBK Capital in Kuwait, said in an e-mail. “I expect the company will use some of the cash raised from the sale to fund a portion of its expansion program earmarked for 2013 and 2014.”

Singapore-based PSA International is the world’s biggest container-port operator.

DP World said as part of a strategic partnership with Goodman Hong Kong, it will continue to manage the port operations. Completion of the transaction is expected at the end of the first half. The deal with Hutchison Port closed yesterday, it said.

DP World, majority owned by state-owned holding company Dubai World, said it expects to make a net capital gain of $151 million from the transactions, which will help maintain its capital position. The company had sold 75 percent of its Australia operations for $1.5 billion to Citi Infrastructure Investors and a partner in December 2010.

Container volumes rose 2.4 percent to 56.1 million twenty-foot equivalent units across it operations last year, the company said. Growth in gross container volumes was driven by the Americas, Asia Pacific and Middle East regions, where it focused on delivering improved efficiencies and productivity.

DP World, which operates more than 60 terminals in six continents, is on track to open new capacity in Santos in Brazil, Jebel Ali in the United Arab Emirates and London Gateway in the U.K. this year.

“This reorganization, forming a strategic partnership and partially monetizing some assets, allows us to realize value and recycle capital into new, fast growing opportunities in other markets,” DP World Chairman Sultan Ahmed bin Sulayem said in the statement.

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