Ports venture pays HK$3b for SCT
China Merchants and MTL vehicle to take full control of Shekou terminals
A new joint venture between port operators China Merchants Holdings and Modern Terminals Ltd will pay more than HK$3 billion to win full control of Shenzhen's Shekou Container Terminals (SCT) from minority shareholders Swire Pacific and a unit of Dubai-based DP World.
The deal calls for China Merchants to inject its Shekou assets into a new joint venture with MTL. The company at present owns 50 per cent of Shekou phase one, 51 per cent of phase two and 100 per cent of partly operational phase three, as well as a 180,000 square metre site near the terminal.
China Merchants is to pay HK$1.78 billion for the 22 per cent stake in phases one and two held by DP World unit P&O Dover and HK$1.38 billion for Swire's 17 per cent stake in phases one and two for a total of HK$3.16 billion.
MTL will in turn pay the same amount to China Merchants in exchange for 30 per cent stake of the new joint venture, with China Merchants taking a controlling 70 per cent.
MTL is a privately owned company 68 per cent owned by Wharf (Holdings) and 27 per cent held by China Merchants Holdings.
The deal values the target port assets at 12.4 times last year's earnings or 3.7 times net asset value as of December last year.
SCT is on the western side of Shenzhen and has six deepwater berths in operation, with three more under construction or planned.
Operational capacity stands at 3.8 million 20-foot equivalent units (teu). Last year, container throughput at the terminal rose 18 per cent to 2.66 million, accounting for 16.4 per cent of overall port traffic in Shenzhen.
China Merchants' stake in SCT will rise to 80 per cent from 70 per cent after completion of the third phase as the red chip, controlled by a state-owned firm directly under the State Council, assumes responsibility for building the three remaining berths. The expansion is scheduled for completion by December 2009.
Included in the deal is a put option for MTL, which previously held only 10 per cent of phase one and 9.8 per cent of phase two. After the joint venture is formed but before construction of the third phase is completed, MTL can require China Merchants to buy its 30 per cent stake for HK$3.96 billion.
Shares in China Merchants rose 3.5 per cent after the announcement to close at HK$30. Trading in Wharf shares was suspended.
Moody's Investors Service yesterday reaffirmed its credit rating on China Merchants saying the company's outlook remained stable.
'Shenzhen will continue to show favourable demand for container port services and therefore China Merchants' new mega SCT terminals in West Shenzhen will enjoy good business growth,' said Moody's analyst Peter Choy.
