Macquarie Infrastructure Company? The Ontario Teachers Pension Plan? Container terminals are red-hot properties for institutional investors. What does this newfound investor interest in box terminals mean for the future of box terminals?
By George Lauriat, Editor in Chief, AJOT
A little less than a month ago, the Ontario’s Teachers Pension Plan (OTPP) announced that the fund had signed an agreement with Orient Overseas (International) Limited of Hong Kong (parent of ocean carrier OOCL-Orient Overseas Container Line) to purchase four marine container terminals in North America for US$2.4 billion. The announcement stunned everyone, from the causal investor to maritime investment experts. It wasn’t that OOIL sold the North American terminals. An earlier announcement following an increase in share prices confirmed that the terminals were for sale. But a teachers’ pension plan? The OTPP wasn’t Hutchinson Port Holdings, PSA, Dubai Port World (DPW), or even an ocean carrier like the AP Moeller Group, Evergreen or APL. After the immediate shock of the purchase wore off, analysts of every stripe faced the obvious question: was the OTPP acquisition a trend or simply an isolated, if not slightly odd, event?
Three trends have clearly emerged that are shaping the market. Certainly, with the purchase of P&O Ports by Dubai Ports World (DP World) and the subsequent fallout in Washington over the Dubai based group’s investment in US port facilities, (under the heading that even negative publicity is better than no publicity at all) the marine terminal industry now has a high profile with the institutional investors. Secondly, nearly every major terminal owing group is chasing capital to build or expand facilities. Thirdly, although the fortunes of containership operators may rise and fall in endless wave-like succession, a function of fluctuating freight rates, terminal volumes keep rising, with no end in sight.
The OTPP isn’t the only unusual investor in the container terminal business. Macquarie Infrastructure Company, an investment arm of Macquarie Bank of Sydney, Australia, something less than a household name in box operations circles, has also made forays into the marine box terminal business with the purchase of Hanjin’s terminal assets and Halterm in the Port of Halifax, Nova Scotia, Canada. In late September, Macquarie acquired a 40% stake in Hanjin Terminals through Macquarie Korea Opportunities Fund (MKOF). According to reports issued by the parties, MKOF will make a 40% ‘strategic investment’ in Hanjin Terminals, while Hanjin Shipping will retain 60% ownership and management control, effectively valuing Hanjin Terminals at approximately $870 million. In another recent deal, Macquarie Infrastructure Partners also bought the assets of Halterm Limited, operator of Canada’s largest East Coast container terminal at the Port of Halifax for $172.75 million.
How profitable these various terminal assets are is a matter for conjecture. For example, OOIL’s Terminals Division posted a record total throughput of 2.57 million teus, with a turnover of $444.3 million and earnings before interest, taxation, depreciation and amortization of $99.8 million for the 12-month period ending June 2006. In 2005, OOIL’s Terminals Division posted net profits after taxation of $36.1 million. The sale also means that OTPP will be accepting $60 million worth of debt owed by the terminal division.
Overall, the OTPP US$2.4 billion acquisition included:
- TSI Terminal Systems Inc. (TSI), which operates two container terminals ’ Deltaport and Vanterm ’ in the Port of Vancouver;
- New York Container Terminal (NYCT) on Staten Island, New York in the Port of New York; and
- Global Terminal (Global) in Bayonne, New Jersey.
Macquarie’s investment banking group has made a push for terminal assets buying stakes in Hanjin’s terminal arm and Halterm in Halifax, Nova Scotia.
In the case of Hanjin Shipping, Macquarie acquired a 40% stake in Hanjin Terminals with its marine terminal