CK Hutchison (0001) stock gained more than 22 percent on Wednesday after the Hong Kong conglomerate sold a majority stake in a US$22.8 billion (HK$177.8 billion) ports unit, including assets along the Panama Canal, to a group led by US buyout firm BlackRock.
It’s possible CK Hutchison will hand back some of the proceeds to shareholders in the form of a special dividend.
“We believe the company could distribute most of this windfall to shareholders,” said Dan Baker, a senior equity analyst at Morningstar. The sale “greatly exceeds our expectations.” The previous valuation for CK Hutchison’s ports business was only US$10.5 billion, according to his estimates.
The sale lifted the wealth of Li Ka-shing, who’s now a senior advisor to the business he founded. His fortune rose US$1.3 billion to US$30.6 billion in the wake of the deal’s announcement, according to the Bloomberg Billionaires Index. His stakes at CK Hutchison and CK Asset (1113) represent just over 40 percent of his wealth, according to the data.
JPMorgan in a report said while selling the Panama business is "understandable", the deal is a "surprise" given most of CK Hutchison's other ports are not in regions directly exposed to Sino-US geopolitical tension.
It could be "an opportunistic deal", JPMorgan said. "Based on our understanding of the management philosophy of CKH, any deal is possible as long as 'the price is right'."
The brokerage said the deal would represent a significant strategy shift because ports would only account for 1 percent of the conglomerates earnings before interest, tax, depreciation and amortisation, from 15 percent. The contribution of infrastructure, currently the largest segment, will rise to 33 percent from 28 percent.
CK Hutchison co-managing director Frank Sixt said in a statement earlier that the “transaction is the result of a rapid, discrete but competitive process in which numerous bids and expressions of interest were received.”
“I would like to stress that the transaction is purely commercial in nature and wholly unrelated to recent political news reports concerning the Panama Ports,” he said.
The sale includes 90 percent of Panama Ports Company, which has operated the Balboa and Cristobal ports in the Central American country for over two decades, CK Hutchison said.
In total, the BlackRock-led group, which includes Terminal Investment and Global Infrastructure Partners, will control 43 ports comprising 199 berths in 23 countries, CK Hutchison said.
The conglomerate's stock rose on the first trading day after the news, outpacing a 1.1 percent rise in Hong Kong's broader Hang Seng Index. Its price is now the highest since August 1, 2023.
The sale involves CK Hutchison's 80 percent stake in Hutchison Ports with an equity value of US$14.21 billion. The conglomerate will receive more than US$19 billion following repayment of some shareholder loans.
The remainder of Hutchison Ports is owned by Singapore's PSA International.
AGENCIES AND STAFF REPORTER
A view of the Balboa Port is pictured after Hong Kong's CK Hutchison agreed to sell its interests in a key Panama Canal port operator to a BlackRock Inc-backed consortium. REUTERS
