China Threatens To Block $22.8 Billion Panama Ports Deal Over Cosco’s Exclusion

China has warned of blocking a massive port deal involving U.S. investment giant BlackRock and shipping company MSC unless its state-owned shipping firm Cosco is given a significant stake in the agreement.

The deal involves the sale of more than 40 ports currently owned by Hong Kong-based CK Hutchison. These include two important ports on either side of the Panama Canal. The business has an enterprise value of $22.8 billion, including debt.

Per reports, Chinese officials have directly told BlackRock, CK Hutchison, and MSC that they will block the sale if Cosco is not included as a partner. The Wall Street Journal, citing unnamed sources, reported that Beijing is pushing for Cosco to become a shareholder in both the Panama ports and the other terminals included in the deal.

CK Hutchison had announced in March that it would sell its 80% stake in the ports business. The deal covers 43 ports across 23 countries. In May, Hutchison confirmed that Swiss company Mediterranean Shipping Company (MSC), controlled by Italian billionaire Gianluigi Aponte’s family, had emerged as the main investor in the group planning to buy the business.

U.S. President Donald Trump has also taken an interest in the deal. He has publicly supported the sale to BlackRock and MSC, calling it a step towards “reclaiming” the Panama Canal and reducing China’s influence in the region. He views the transaction as a national security victory for the U.S.

Sources also told the Wall Street Journal that Chinese authorities have instructed their state-owned companies to halt any new business dealings with CK Hutchison or other firms linked to Li Ka-shing, the billionaire founder of the Hong Kong conglomerate, unless Cosco is included in the sale.

The final terms of the deal are still being negotiated, with the companies facing a July 27 deadline for exclusive talks. If no agreement is reached by then, Cosco could be added to the deal. Per reports, BlackRock, MSC, and Hutchison are all open to including Cosco as a partner to move the deal forward.

The inclusion of Cosco has also been linked to recent trade discussions between China and the U.S. in Switzerland. Chinese authorities reportedly used those talks to push the idea of Cosco joining the deal as a way to resolve tensions.

If the deal is finalised, MSC is expected to become the largest port terminal operator in the world. BlackRock is expected to take over the two Panama ports specifically, while MSC will control other terminals globally.

This is not the first time China has interfered in international shipping deals. In 2014, Chinese regulators blocked a major alliance between MSC, Denmark’s Maersk, and France’s CMA CGM.

Reference: Reuters

Source: Maritime Shipping News