China Warns CK Hutchison To Avoid Circumventing Antitrust Review Of $23B Ports Sale

China’s top market regulator, the State Administration for Market Regulation (SAMR), has issued a clear warning to CK Hutchison regarding its planned sale of its global ports business.

The $23 billion transaction, involving the Hong Kong conglomerate’s sale of 43 overseas ports, is under intense scrutiny due to the inclusion of two ports located at either end of the Panama Canal.

SAMR has said that no part of this deal can proceed without first undergoing a formal antitrust review, reminding the parties involved that attempting to bypass this process could lead to legal consequences.

The warning comes after a recent Wall Street Journal report that indicated there are discussions about separating the two Panama Canal ports from the deal.

According to sources, the parties involved in the transaction, led by US investment firm BlackRock, are considering to move forward with most of the sale while disputes over the two Panama Canal ports remain unresolved.

The two ports that CK Hutchison operates at either end of the Panama Canal are strategically important. The Panama Canal itself has become a focal point in the ongoing trade tensions between the United States and China.

U.S. President Donald Trump has publicly expressed a desire to “take back” control of the Panama Canal, which was originally built and controlled by the U.S. until it was handed over to Panama in 1999.

The two ports operated by CK Hutchison, which is part of the conglomerate’s Panama Ports Company subsidiary, have been a major concern for U.S. officials, who see the ports as vital to military and commercial shipping.

China sees the sale as harmful to its interests, with state media criticising it as a possible betrayal of its strategic goals.

In a statement released on Sunday, SAMR made it clear that it was closely monitoring the deal.

The regulator stated that any attempt to proceed with the transaction without undergoing the appropriate antitrust review would result in legal responsibility for the parties involved.

SAMR’s focus is on ensuring that the deal complies with China’s Anti-Monopoly Law, which seeks to prevent any unfair consolidation of business power that could harm competition.

This warning follows a media question about a report earlier this month suggesting that BlackRock’s consortium may separate the two Panama Canal ports from the main deal, effectively creating two distinct transactions.

The deal in question involves CK Hutchison’s sale of its 80% stake in a portfolio of 43 ports spread across 23 countries. The entire business, which has an enterprise value of $22.8 billion, is being sold to a consortium led by BlackRock.

In exchange, CK Hutchison is set to receive $19 billion in cash. Singapore’s PSA International, which holds the remaining 20% stake in the business, is also exploring the sale of its share.

The sale includes ports in regions such as Europe, the Middle East, and Asia, but excludes CK Hutchison’s ports in Hong Kong and mainland China.

According to the Wall Street Journal, discussions have taken place regarding the possibility of separating the two Panama Canal ports from the rest of the deal.

Sources familiar with the matter have suggested that the BlackRock-led consortium is looking to move ahead with the bulk of the deal, while the dispute over the two ports is still being resolved.

This separation would involve different ownership structures, with the Panama ports potentially being dealt with in a separate agreement.

Wilson Chan, co-founder and policy researcher at the Pagoda Institute, described SAMR’s warning as typical for any regulator involved in a high-profile transaction.

He added that the splitting of the deal could create legal and regulatory complications, potentially delaying the approval process.

Beijing is concerned that the sale could affect China’s strategic goals, especially those related to the Belt and Road Initiative, which seeks to increase China’s influence in global trade.

Lau Siu-kai, a consultant at the Chinese Association of Hong Kong and Macau Studies, said that Beijing would not support any deal that violates China’s anti-monopoly laws or harms its national interests.

On the other hand, U.S. officials have been outspoken about the deal, calling it a potential “reclaiming” of the Panama Canal.

Trump’s administration has pushed for American ships to be able to pass through both the Panama Canal and the Suez Canal free of charge.

The BlackRock-led consortium has remained largely silent, though it has revealed that it remains optimistic about finding a solution to the disputes over the Panama Canal ports.

References: Reuters, SCMP

Source: Maritime Shipping News