As of January 12, the purchase of three of four of OOIL’s container terminals in its portfolio had been agreed and the purchase of the final one, the New York Container Terminal on Staten Island, New York was awaiting the approval of the Port of New York and New Jersey. The three terminals on which the sale transaction had been completed were the Deltaport and Vanterm terminals in the Port of Vancouver and Global Terminal in Bayonne, New Jersey, Port of New York and New Jersey.

The sale is something of a benchmark in port asset sale terms. The price paid represents 11.75 times the book value of US$200m as of the end of June last year and is set to generate a profit of US$1.98bn, according to the Daiwa Research Institute. The Institute also puts the net profit per share on the disposal at around US$3.2 or HK$25. Indeed, the level of profit is such that the parent of OOIL, Orient Overseas Container Line, has said that the funds received could be used to expand its core shipping business, pay a special dividend and/or arrange a share buyback.

Jim Leech, senior vice president, Teacher’s Private Capital, the private investing arm of OTPP, in a statement highlighted the attributes of the sale for OTPP.“This acquisition,”he said,“represents solid,robust assets and has little vulnerability to market or economic vagaries, and offers the long term cash flow we look for as a pension plan.

We are thrilled to welcome these assets into our portfolio and are keenly focused on continuing to invest in and expand the terminals.” The terminals will actually be positioned within the fund’s infrastructure and timber portfolio, which following the completion of this acquisition will have combined assets of about $6.5bn.

Mr Leech’s comments underline a number of important points that enable a “buy”at this sort of level by such an institution – the cash flow element and the long-term view OTPP is taking. He also references market stability but this isn’t an element all parties would agree with. While container traffic has shown virtual consistent year-on-year growth it is subject to volatile swings and notably where there is competition in port ranges. Indeed, the reason why container terminal operators in particular are felt to be justified in looking for relatively high margins of 15 and above is precisely because traffic can up and away – it is not a given that is anchored.

The other landmark deal recently is the sale of the DP World-owned P&O Ports North America,owner and operator of a portfolio of terminals principally stretching around the east and gulf coasts of the US.DP World announced in December that it had reached agreement to sell 100% of P&O Ports North America to a wholly-owned subsidiary of AIG Global Investment Group, but neither side disclosed a price.

Today, however, industry insiders are saying that the deal concluded for this effective fire sale – forced by concerns in the US over a UAE-based entity controlling US port assets – has achieved a near record valuation. Remarkable as at one time there were murmurs about the US Treasury making up the difference for any shortfall which fell below its target price of $700m – the figure which DP World publicly stated was its baseline for bids. The sale price eventually achieved has not been publicly disclosed but is understood to be significantly in excess of $700m but below $1bn, a price that DP World has every reason to be comfortable with given the bizarre circumstances of the sale. Others encouraged These two latest port asset sales and the high prices achieved as a result plus others that have gone before, such as Australian investment bank Macquarie’s acquisition of a 40% stake in six Hanjin Shipping terminals for US$348m, are encouraging to others looking to cash-in on terminal assets as they become the focus of significant interest from pension funds and other investment banks who have a taste for good cash flow and are prepared to stay in the business, one way or another, for some time. Shipping line terminal assets are ideal candidates for such sales particularly where they can retain ultimate control over the terminal network – as in the case of Hanjin – or where they can stay top of the tree or near it in terms of operational considerations.

This shouldn’t be a problem as after all the incoming investor wants to consolidate and expand traffic volume and as such financial institution acquisitions of shipping line terminal networks, either wholly or partially, have the opportunity to be a “marriage made in heaven”, particularly with same prices being achieved today. As a footnote to this view it is also pertinent to add the point that shipping lines traditionally have been rather “easy come, easy go” with their terminal investments – one major indicator of this being that when bad times have come along they have been fairly quick to undertake terminal divestments to prop up the core shipping business. You could in fact say that nowadays it is easier to “come and go” as in a large number of cases they really don’t need to go at all – the financial investor almost needs them to stay and this can mean continuing priority status on the operational front. One example of this sort of expediency perhaps is APM Terminals decision to sell its 50% stake in the Port Newark Container Terminal, US in with the P&O Ports North America disposal. P&O Ports owned the other 50% of the Newark Container Terminal. This sale was realised through APM agreeing to sell its stake to P&O who, in turn, sold it on to AIG.

There is every reason to believe that we haven’t yet seen the end of significant financial institution investments in the ports sector at what are widely perceived to be big prices.

One other “name in the frame”at the moment in this latter respect is Forth Ports,the UK-based port operator, which has recently seen a significant uplift in its share price as a result of speculation over potential interest in  a partial or whole acquisition.