Li Ka-shing sells bulk share of port terminal to mainland shipping giants

Tycoon unloads 60 per cent of Terminal 8 West to mainland shipping giants for HK$2.5 billion, raising doubt over commitment to Hong Kong

UPDATED : Friday, 04 April, 2014, 10:27am

Charlotte So

A straddle carrier at Kwai Chung container terminal. Li Ka-shing's sell-off of Hong Kong assets continues. Photo: K.Y. ChengTycoon Li Ka-shing has sold the bulk of his stake in a port terminal, disposing of another asset in Hong Kong and raising fresh questions about his oft-repeated claim that he has confidence in the city and will not withdraw.

The port arm of Li, Hutchison Port Holdings Trust (HPHT), decided to sell a 60 per cent stake in Hong Kong Terminal 8 West for HK$2.47 billion to two mainland shipping conglomerates. The pair are Cosco Pacific, which acquired the 40 per cent stake, and China Shipping Terminal Development, which bought a 20 per cent share.

Gerry Yim, HPHT chief executive, said the deal would improve port operations in terms of flexibility, efficiencies, synergies and profitability.

Analysts digested the latest significant move by Li.

"Li has long lost confidence in the Hong Kong port business when he decided to spin off the operations of HPHT in the Singapore Exchange in 2011," an industry analyst said. Others demurred, saying the move was consistent with the strategy where he spun off his holdings in Hong Kong Electric and considered selling ParknShop last year.

"The port business is still a cash cow but the ports in Hong Kong have turned mature and could register low growth," said Benjamin Lo, an analyst at Nomura International.

Li has long lost confidence in the Hong Kong port business when he decided to spin off the operations of HPHT in the Singapore Exchange in 2011

INDUSTRY ANALYST

"The company is in the process of monetising low-growth assets which have good valuations when the interest rate environment is favourable and to deleverage the balance sheet ahead of an upcycle in the interest rate."

Hong Kong port has been overtaken by Shenzhen as the world's third busiest container terminal. The city's dock strike last year prompted shipping lines to divert cargoes to Shenzhen and most have not returned.

Li, Asia's richest man, gave a downbeat assessment of Hong Kong last month, warning that the Occupy Central campaign, the harassment of mainland tourists and declining competitiveness with neighbouring markets would erode the city's prospects. But in November he had dismissed suggestions that he was pulling out of the city as a "big joke".

The sale of the terminal came a year after HPHT acquired the entire stake of Asia Container Terminals, the operator of T8 West, from DP World terminals.

Talks between HPHT and Cosco Pacific began in June after operations in Li's Hong Kong International Terminals were paralysed by the 40-day strike that ended on May 6. The dispute became so bitter that striking dock workers placed a demon-like effigy of Li in front of the Cheung Kong building, the headquarters of his flagship company.

After selling the 60 per cent stake in T8 West, HPHT will continue running the T4, T6,T7 and T9 terminals in Hong Kong.

HPHT saw its earnings sink 25 per cent year-on-year in 2013 to HK$1.67 billion as the volume of business at its Hong Kong port operations declined 12.4 per cent.