Swire Pacific eyes $2.3b profit in MTL stake sale
Swire Pacific will book a $2.3 billion profit this month by selling its minority stake in Modern Terminals Ltd (MTL), joining the growing number of firms that have sold off Hong Kong port assets in the past year.
The Wharf (Group) and China Merchants agreed yesterday to pay Swire $2.9 billion for its 17.62 per cent stake in MTL in a deal to be completed by August 15, bringing Wharf's share in the port's No2 terminal operator by volume to 67.93 per cent.
'The directors are of the view that the purchase price is reasonable and that the acquisition will increase the group's equity interest in MTL, which will in turn increase the net profit attributable to shareholders,' Wharf company secretary Wilson Chan said.
China Merchants will pay $827.8 million for 5.03 per cent of MTL, boosting its stake to 27.14 per cent.
The deal comes a month after Hutchison Whampoa sold 20 per cent of majority held Hongkong International Terminals (HIT), the port's No1 operator by volume, to Singapore's state-owned PSA International for US$925 million, booking an exceptional one-off $5.5 billion profit in the process.
'On a proceeds-to-book basis, the price looks broadly in line with the PSA deal,' said an analyst for a European investment house. 'But that maybe shouldn't be taken as a benchmark because Singapore tends to pay top dollar. There may also be levels of net debt that we are unaware of.'
Swire joins HIT, NWS Holdings, Hongkong Land and Sun Hung Kai Properties on the list of firms that have recently sold stakes in the main terminals in Hong Kong, a port widely seen as entering its sunset years after losing its status as the world's busiest container port in the first half.
But there remained at least one bull in the pack yesterday.
'We are the second-largest shareholder in MTL so adding these shares will only give us a better position,' said Park Xueqing, a spokesman for China Merchants. 'We believe it was a reasonable price and it shows not only our confidence in the port business, but also our confidence in Hong Kong.'
Swire Pacific, controller of Cathay Pacific Airways, said the proceeds would be used for general working capital. But analysts said the move was bound to fuel speculation the capital could be used to enhance its presence in the mainland aviation market.
Swire remains a 17.5 per cent shareholder of Phases I and II of Shekou Container Terminals in western Shenzhen.
A spokeswoman said the move should not be construed as Swire signalling its desire to get out of the container terminals business.
Maisie Shun Wah said: 'We would have liked to have had more control but that was not possible as a minority shareholder.'