DP World will sell its minority shareholding in two of the three Shekou container terminals in Shenzhen to China Merchants Holdings (International) Company to enable a consolidation of the three terminals into one, the firms announced yesterday.
The Dubai-based port operator, which earlier this month sold six ports in the United States for a reputed $1 billion (Dh3.67bn), will earn $228.5 million (Dh838m) in cash from this sale.
Swire Pacific, another minority shareholder that is also selling its interest in the terminals, will earn about $179.5m (Dh685m).
DP World had acquired the United States as well as the Shenzhen interests as part of its purchase of P&O.
DP World's Senior Vice President and Managing Director of Asia Pacific Peter Wong, said the company will re-invest the proceeds from the sale into assets in the region.
China's exports surged 32.8 per cent in November from a year earlier, while imports rose 18.3 per cent, driving up demand for services at Shenzhen and other ports. Shenzhen, which handled 13 per cent more cargo this year, is well on track to topple Hong Kong from its place as the world's second-busiest port.
A new venture between China Merchants and Modern Terminals will take full control of the three Shekou terminals, which handle about 14 per cent of Shenzhen's container volume. The terminals have six berths, with three due to open by the end of 2009.
China Merchants said in a statement that it will eventually own 80 per cent of the Shekou venture with Modern Terminals holding the rest.
China Merchants is paying the equivalent of 15 times 2006 estimated earnings for the stakes, according to the Credit Suisse Group. That compares with a price of more than 20 times earnings that DP World paid for P&O in November.
"Firms are betting on increasing trade demand in China, the world's manufacturing hub," Ingrid Wei, a Shanghai-based UBS analyst told Bloomberg.
"It's a long-term investment, which will pay off given the booming trade." China Merchants has not ruled out buying Modern Terminal's stake in the new venture if the partnership fails. Modern Terminal's stake is valued at $100m (Dh367m).
"The key question is why Swire and Dubai are willing to sell so cheap," Credit Suisse wrote in a note to clients.
"They may feel the outlook for western Shenzhen ports is no longer attractive, capped by the new capacity in the area." The first phase of the $910m (Dh3.3bn) Da Chan Bay Terminal One, controlled by Modern Terminals, is due to begin operations in Shenzhen at the end of next year.
Cosco Pacific is spending $500m (Dh1.83bn) on a facility in nearby Nansha.
YAZAD DARASHA DEPUTY BUSINESS EDITOR
Emirates Today 2006
