CK Hutchison Invites China Investors to Join Bidding for Its $22.8 Billion Port Business

CK Hutchison, a port operating company under Li Ka-shing, is seeking to bring in a "significant Chinese strategic investor" for the sale of its global port assets valued at $22.8 billion. This move aims to alleviate geopolitical sensitivities involved in the transaction while meeting various regulatory approval requirements.

This news was disclosed on July 28, coinciding with the expiration of the 145-day exclusive negotiation period between CK Hutchison and a consortium led by U.S. asset management firm Blackstone Group. The deal involves 43 ports in 23 countries worldwide, including two key ports along the Panama Canal, which has attracted significant attention from the Chinese side.

Previously, the port operations giant China COSCO Shipping (hereinafter referred to as "COSCO Shipping") had been in talks with CK Hutchison regarding joining the consortium. According to insiders, COSCO Shipping hopes to obtain a "strong position" in the transaction as a condition for joining.

CK Hutchison stated in its announcement on the Hong Kong Stock Exchange that to complete this transaction, it is necessary to adjust the composition of the consortium members and the transaction structure, and "allow sufficient time for relevant discussions." The company also reiterated that it will not proceed with any transaction that has not been approved by all relevant regulatory authorities.

The potential deal was initially seen as a wise exit strategy for the Li Ka-shing family amid global geopolitical turmoil. However, as the Chinese government expressed concerns about the potential impact of the transaction and warned the parties involved not to bypass antitrust scrutiny, the deal quickly evolved into another battleground in the China-U.S. rivalry.

The Chinese side is concerned that this transaction may lead to strategically important port assets falling into the hands of a consortium regarded as a "proxy of U.S. influence," especially in the Panama Canal region. To this end, China's State Administration for Market Regulation has explicitly stated that it will conduct an anti-monopoly review of the transaction in accordance with the law to "safeguard fair competition and the public interest." State-affiliated media have also commented that proceeding with the current transaction structure would be tantamount to "selling out national interests."

CK Hutchison stated that any new investor must be an "important member of the consortium." It was previously reported that the Italian billionaire Aponte family's Terminal Investment Ltd (TIL) will take over all port assets except for the two ports in Panama, while Blackstone Group's global infrastructure division will take over the Panama ports.

Despite the potential for adjusting the transaction structure and the possible inclusion of COSCO Shipping to alleviate scrutiny from the Chinese side, there is still uncertainty about whether this plan can balance U.S. interests while appeasing China. Ballingal Investment Advisors strategist David Blennerhassett pointed out: "If Chinese investors hold a majority stake, the transaction is unlikely to go through; however, if the shareholding is below 50%, it may be more easily accepted by multiple parties."

In the market, so far, CK Hutchison's stock price has risen by 1.6%, outperforming the Hang Seng Index's gain of 0.9%. Investors have recently regained confidence in the transaction prospects, mainly due to COSCO Shipping's involvement increasing the likelihood of the deal being completed.

However, the geopolitical uncertainty has not yet been eliminated. Former U.S. President Trump once stated that he hoped to bring the Panama Canal "back under American influence," and called the deal an opportunity to "regain control." This statement not only angered China but also caused dissatisfaction on the part of Panama.

Furthermore, this controversial transaction has also affected other businesses of the Li Ka-shing family. Earlier reports indicated that his younger son, Richard Li, encountered obstacles in negotiations to expand his insurance business into mainland China. In March of this year, there were also reports that the Chinese government had requested state-owned enterprises to suspend new collaborations with companies related to the Li family.

Analysts pointed out that if the deal continues to be delayed, CK Hutchison's stock price might face downward pressure. JPMorgan stated in a report that if COSCO Shipping successfully joins the consortium, it could alleviate Chinese regulatory hurdles and increase the likelihood of completing the transaction. However, the final transaction structure might be adjusted, particularly regarding whether to continue including the two ports in Panama, which could also affect the transaction price.

This $22.8 billion port asset sale fully reflects the highly complex nature of current geopolitics. CK Hutchison is attempting to balance the interests of China and the United States by bringing COSCO Shipping in as a key member of the consortium, thereby ensuring the deal passes regulatory reviews in multiple countries. The final structure of the transaction, as well as whether the political confrontation between China and the US can be resolved, will directly determine the success or failure of the deal. This will have a profound impact on the business empire of the Li Ka-shing family and the global port landscape.