Orient Overseas (International) Ltd found a buyer for its port business in California, fulfilling a pledge made to US regulators when China’s Cosco Shipping Holdings Co took over the Hong Kong company to create the world’s third-largest container-ship operator.
Orient Overseas agreed to sell its terminal in Long Beach, California, for $1.78bn to Macquarie Asset Management, it said in a statement on Tuesday.
The sale, which still needs regulatory clearance, was a condition set by US authorities for approving a deal last year for Shanghai-based Cosco Shipping to acquire Orient Overseas for more than $6bn.
The long-awaited disposal clears the way for Cosco Shipping to focus on integrating Orient Overseas and reap rewards from the acquisition, the biggest for a major container-shipping deal since 1997. Shipping lines have consolidated or collapsed in the past five years as they struggled to stay afloat amid excess capacity and weak global demand.
The Chinese company offered to buy Orient Overseas in July 2017 and subsequently received Chinese and European Union antitrust clearances. A year later, Cosco Shipping pledged to sell the Long Beach terminal to allay US regulators’ concerns over the transaction, which would make Cosco Shipping the owner of the facility. Under such mandated transactions, the Committee on Foreign Investment in the US must also approve the buyer.
Orient Overseas shares gained as much as 4.6%, the biggest intraday gain since January 4, and were up 3.9% as of 10:56am in Hong Kong. Cosco Shipping gained as much as 1.9%, while Hong Kong’s benchmark Hang Seng Index fell 0.5%.
The consortium led by Macquarie will gain access to the second-busiest port into the US and to one of the most modern shipping facilities in the country. Orient Overseas agreed to berth its vessels at the terminal under a 20-year accord.
Orient Overseas said it expects to realise an estimated pretax gain of about $1.29bn from the sale. The proceeds could be used to fund new growth opportunities and as working capital, the company said. The Hong Kong company could pay a special dividend from the deal, Jefferies Group analyst Andrew Lee said in a note.
Orient Overseas has been operating the Long Beach terminal under a 40-year lease agreed in 2012. Port of Long Beach and Port of Los Angeles, together the largest shipping facility in the US, serve as major US gateways for trans-Pacific trade. Port of Long Beach handled 8.09mn 20-foot containers last year, 7.2% more than in 2017, according to its website.
AP Moller-Maersk A/S and Mediterranean Shipping Co. are the biggest container-shipping companies in terms of capacity, ahead of Cosco Shipping, according to Alphaliner, a shipping-data provider.
JPMorgan Chase & Co. served as financial adviser to Orient Overseas for the deal.