PSA said it was the largest investment the company has ever made, although it offered $6.2 billion for P&O. Under the deal struck with Hutchison Whampoa Ltd., the conglomerate that owns Hutchison Port Holdings, PSA will also own a piece of HPH’s investment arm. Hutchison Whampoa has major holdings in telecommunications, hotels and other industries.
The deal expands an alliance between the top two container terminal operators last summer when Hutchison sold a 20 percent stake in Hong Kong International Terminals and a 10 percent shareholding in COSCO-HIT (also in Hong Kong) for $925 million.
PSA has been in an expansion mode in an industry that has seen a wave of consolidation in the past two years as the industry positions itself to take advantage of a worldwide boom in trade. PSA entered the lucrative Hong Kong market earlier in 2005 with the purchase of a stake in Asia Container Terminals for about HK$3 billion ($385 million).
“We believe this investment will generate good long-term value for PSA and allows us to benefit from a well-diversified spread of assets globally,” PSA Chairman Fock Siew Wah, said in a statement. “PSA will continue to expand its global footprint by investing in opportunities that make good commercial business sense to us.”
PSA, the second-largest global port operator, manages 19 port facilities in Singapore, China, Europe, India, Korea, Southeast Asia and Japan. Last year, the company handled 41.2 million TEUs. PSA reported net profits in 2005 of S$1.6 billion ($653 million) up 20.2 percent from S$881 million the year before. PSA’s operating profit jumped 15.9 percent to S$1.4 billion ($889 million), compared to S$1.2 billion in 2004. Revenues for 2005 was up just 2.7 percent to S$3.7 billion ($2.3 billion), from 2004’s S$3.6 billion.
Singapore government-controlled investment company Temasek Holdings is the parent company of PSA.
Hutchison operates 42 terminals in 20 countries and handled 51.8 million TEUs last year.
Hutchison Whampoa said it expects to realize a profit of $3.14 billion from the deal, which was struck to give shareholders a chance to cash in on the value of the company.
Hutchison Whampoa Group Managing Director Canning Fok said the transaction sets “an attractive benchmark for the group's remaining interests in the business. which we will continue to control and manage,” raising questions about whether Hutchison is looking to sell other parts of its ports subsidiary.
The two companies said they expect to finalize the deal by the end of May.
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