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Taking stock
01 Jun 2007
Other than for a select number of Chinese ports, stock exchange flotation has so far not proved a hugely popular method of raising cash in the international ports industry. Indeed, recent times have seen a number of significant players exit from public listings as they have been acquired by private entities – we have seen, for example, the acquisition of Associated British Ports by a Goldman Sachs-led consortium for £2.4bn and its exit from the London Stock Exchange.
Similarly,Mersey Docks & Harbour Company exited from the London Exchange in 2005, following its purchase by the private sector group UK-based Peel Holdings, and in the same year Teesport, UK was delisted when purchased for £260m by the Babcock & Brown Infrastructure Group. Prior to this, PD Ports was acquired by stockbroker Collins Stewart,from Japanese owners Nikko, for £172m and was floated on the Alternative Investment Market in July 2004 and subsequently listed on the London Stock Exchange in 2004. In 2006, P&O Ports, the global port operator,was also de-listed from the London Exchange following its £3.9bn acquisition by DP World, the sovereign-owned Dubai-based international ports group.
The London Stock Exchange used to be one of the Exchanges most heavily populated by ports groups but clearly within the space of a few months this situation has changed radically, due on the one hand to consolidation activity in the sector and on the other to the increased interest of infrastructure funds or similar bodies in the acquisition of port businesses and their respective assets.
As noted at the outset, the exception to this rule has been with a number of Chinese ports who have, over the last couple of years, developed a penchant for listing on the Hong Kong Stock Exchange.
Xiamen International Port raised $174m in late 2005/early 2006 with an offer consisting initially of 858m new and existing H shares, representing 32.88% of the enlarged issued share capital of the group. Both the institutional and retail tranches were well oversubscribed, with the retail tranche recording a subscription rate of 93 times.
Dalian port’s experience was similar – the port raised $277m in an initial public offering in early 2006 and saw its shares rise 68% on their trading debut.The following month, Tiajin port development repeated the experience seeing its share price surge 26.3% on its trading debut – it too was hugely oversubscribed.
Given their positive experience, it is hardly surprising, therefore, that other Chinese ports intend to follow in their footsteps:“We are preparing an IPO and I would prefer to list in Hong Kong, hopefully this year,” said Chang Dechuan, chairman and president of the Qingdao Port Group, recently. Also known to be in the pipeline is an IPO for the Shanghai International Port Group which is targeting raising $700m.
Clearly, investors – institutional and retail – see investment in Chinese port interests as positive. There are certainly no signs yet from the analysts that capacity will outstrip demand and dull the enthusiasm of investors.
The near term future may also see others, outside China, finding favour with the idea of a partial float. It has just been reported in the financial press that DP World has hired Deutsche Bank and Shuaa Capital,a Dubai-based investment house, to consider a partial float or refinancing. It is thought that if the partial flotation option is taken up DP World would seek to raise around one billion dollars from the float, involving selling a minority stake – 20% is a figure that has been bandied around previously. The listing would almost certainly involve some of the shares being listed on the new Dubai International Financial Exchange – London may also be involved. A decision is expected in the autumn.
Another partial flotation is expected in the autumn in conjunction with state-owned Hamburg terminal operator HHLA – up to 30% is expected to be sold with a listing on the stock exchanges in Hamburg and Frankfurt and a private placement with institutional investors in the US.
Also rumoured to be waiting in the wings are potential listings from other major entities such as PSA and Eurogate – long talked about without much action, but it could be successful listings from parties such as DP World and HHLA will help tip the pendulum back in favour of stock market listings in the international port business.
