COSCO offers to give Long Beach Container Terminal to a US operator, aims to close the OOCL takeover in June

Long Beach Container Terminal. Source: LBCT

Cosco Shipping has suggested a solution to the US officials with regards to the Long Beach Container Terminal in order to get their permission for the OOCL acquisition, The Wall Street Journal informs.

In July 2017, the Chinese state-run Group offered to buy Hong Kong’s Orient Overseas International Ltd (OOIL), the parent company of OOCL container line, for USD 6.3 bln. This includes OOCL’s long-term concession to run the container terminal on Pier E in the port of Long Beach. This deal has been assessed and approved by anti-trust regulators of the world but is currently being reviewed by the Committee on Foreign Investment in the US (CFIUS), a national panel which verifies foreign purchases of American businesses with national security reasons. CFIUS expressed concerns about transferring the Long Beach terminal to Cosco, as it will become their third facility in California.

Today, Cosco, through its US branch Cosco Shipping (North America) Inc., holds 51% of shares in Pacific Maritime Services LLC, which operates Pacific Container Terminal on Pier J at the Port of Long Beach (the remaining stake of 49% belongs to SSA Marine). Besides, Cosco owns 100% of West Basin Container Terminal at the Port of Los Angeles, which it acquired through the merger with China Shipping in January 2016.

According to WSJ, Cosco executives met with CFIUS officials at Washington and proposed to hand over the Long Beach Container Terminal to a third-party trust under US management for a one-year period until Cosco finds a buyer for this terminal. According to the market estimations, the terminal may be worth to USD 1.5 bln.

“Cosco will not have any participation or sway within the trust,” one person directly engaged in the matter explained. “Additionally, it filed a range of amendments previously required by CFIUS.”

Earlier, Cosco Shipping’s vice chairman Huang Xiaowen said that the planned takeover of OOCL is on track and will be completed by the end of June.

As we wrote last year, with this acquisition, Cosco Shipping, which is now #4 liner carrier by fleet capacity having 1.84 mln TEU, will increase its fleet to 2.9 mln TEU and move up to the third place leaving CMA CGM behind.

Meanwhile, Cosco Shipping Ports has announced that on 20 and 21 June 2018, the company’s directors and management as well as management personnel of the terminal companies purchased a total of 1,372,000 shares of the company at an average price of HKD 7.11 (USD 0.9) per share with their personal funds under the Share Option Scheme. The total amount raised reached HKD 9.8 mln (USD 1.25 mln). The purchased shares represent about 0.04% of the total number of issued shares and will be lock up for a year from the date of purchase.

Mr. Zhang Wei, Vice Chairman and Managing Director of Cosco Shipping Ports said: “The Share Purchase reflects management team’s strong confidence in the Company’s prospect, and with the share option formally granted, we have aligned our interests with shareholders.”

Julia Louppova:
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