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CK Hutchison’s $23 billion port sale was reminiscent of the swashbuckling transaction that produced the Hong Kong conglomerate’s best one-day profits in nearly a decade, announced in March, and created the name of founder Li Ka-Shing. The ongoing negotiations with Beijing, which came out against sales, reflect a more mediocre reality.
As originally presented, selling non-Chinese CK ports to a group containing BlackRock would win $19 billion in revenue. In return, they will offload units that accounted for 9% of revenue last year. The third best day ever, just behind the fuss caused by an internal reorganization in 2015 and a boost like Feng Shui from the 1998 Feng Shui market after the New Year break when the news first broke, when CK stock jumped 22%.
For the past two years, CKs have been trading at less than half their book value, only a third before this transaction. Considering the mix of retail, telecommunications and infrastructure assets from 50 countries, the big conglomerate discount is one reason.
But that Hong Kong home is another big problem. Nine years ago, CK experienced the first public bar to bid overseas for reasons that is Chinese and security risk. Since then, it has become more common for Hong Kong companies. The port’s trading with CK issues now shows that Beijing is at risk of directly blocking its activities.
China attacked the deal. This was spurred by US President Donald Trump’s opposition to the ownership of “China” of the port booking the Panama Canal. Both buyers and sellers are reportedly looking into what might soften China.
Port sales are important beyond its size. Evidence of new appetite for transactions could help CK realize the value trapped in other sectors. It will be the biggest deal made by the company as Li handed over the reins to his son Victor in 2018. In size, it went back at least a decade or so when CK kickstarted the wave of mobile telecom integration in Europe.
Aside from CK, Hong Kong, or traders, it became a reliable source of bankers’ fees a few years ago. Earlier this year, famous colonial powerhouse Jardine Matheson openly badges not many companies, but even mere long-term investors.
For example, CK trading continues this week in the UK. For example, it completed a £16.5 billion merger of three mobile networks with Vodafone. But its port hardships show that the role of corporate swashbucklers is much diminished in the world of superpower politics.
jennifer.hughes@ft.com
