Li Ka-shing ponders partial sale of port assets in Hutchison Whampoa

Billionaire Li Ka-shing is mulling a partial disposal of the port operations held by Hutchison Whampoa to a consortium of state-owned mainland firms while ratcheting up his effort to snap up assets in Europe in an increasingly hectic round of corporate restructuring.

Hutchison and four mainland companies had been in talks since the middle of last year over a 40 per cent stake in Hutchison Port Holdings (HPH) valued at HK$150 billion to HK$160 billion, a source with direct knowledge of the matter said.

At the other end of the table from Li are China Merchants Holdings (International), Cosco Pacific, China Shipping Terminal Development and State Development & Investment Corp.

"There is nothing at this moment that we should report to the market. If and when there is any transaction which requires an announcement according to the Hong Kong listing rules, we will duly comply," China Merchants said in a statement.

The possible deal also hit a hitch as the buyers found Li's price "excessively overvalued", the source added. "It is like a replay of the ParknShop [deal]. The buyers would only end up massively overpaying for assets with no essential upside and no managerial control," the source said.

In 2013, Li scrapped a plan to sell ParknShop, which owns a chain of 345 supermarkets on the mainland, Hong Kong and Macau, after potential buyers appeared to be put off by the US$3 billion to US$4 billion price tag. Eventually, Singapore's Temasek Holdings bought almost a quarter of AS Watson Group, which owned ParknShop.

Known as "superman" in the city, Li has been buying assets from Canada to Europe, stoking talk that he is shifting or transferring assets out of Hong Kong and mainland China. He has denied he is leaving.

Hutchison holds an 80 per cent stake in HPH, the world's largest container port operator by throughput with a foothold in 52 ports in 26 countries.

Neil Davidson, a senior port and terminals analyst at British maritime consultancy Drewry, said the prevailing market price for port assets after the 2008 global financial crisis stood at 10 to 12 times earnings before interest, tax, depreciation and amortisation (ebitda). "During the 2005 to 2007 market peak, it was 20 to 25 times, which now seems extraordinary," he said.

The port business, including HPH and HPH Trust, a Singapore-listed business trust that holds container ports in southern China, generated HK$11.45 billion in ebitda in 2013, putting the HK$150 billion to HK$160 billion price Asia's richest man is asking for at 26 to 28 times ebitda.

By comparison, Hutchison sold a 20 per cent stake to Singapore's PSA International in 2006 for HK$34 billion, equivalent to 17 times earnings before interest and tax.

When contacted by the South China Morning Post about the talks with the mainland companies, Hutchison said: "The market rumour is unfounded."