Deal or no deal
The level of deal activity in terms of terminal investment opportunities is steadily building.
There is no return yet, however, to the 2007-8 price levels for such opportunities. The top end of the range today, for example, for the purchase of existing container terminal businesses is 8 to 12 times EBITDA compared with multiples of up to 30+ in 2007-08.
Against this background, it might be expected that those parties selling assets will put more work into the preparation of a sale in order to secure the best price and best fit strategic partner in the case of a port authority.
And so it proves to be the case in the majority of instances but there also continue to be exceptions to this important rule.
And strangely many of the exceptions are parties that are hoping to sell what can be termed difficult opportunities. Consider, for instance, the recent call for bids for a new terminal in Bourgas, Bulgaria – a terminal that was built with Japanese finance and originally intended for use in conjunction with a steel mill.
Virtually, however, as soon as the terminal opened for business the steel mill closed and the terminal was made redundant. Hence the Bulgarian authorities are now offering this terminal for alternative uses, chief among which is the possibility of using it as a container terminal facility.
In effect, it is intended to replace a planned newbuild container terminal which was intended to give Bulgaria the capability to accommodate deep draught vessels. The problem with this scenario, however, is that the port of Bourgas now only handles a few thousand teu and its future traffic growth prospects are not good.
Further, there is no suggestion on the part of the port authority or any other Bulgarian government agency that the existing container terminal operation will be wrapped into that of the new facility when it comes into operation in order to avoid cut-throat competition. Any experienced investor would have concerns over the traffic levels but would almost definitely not participate in view of the latter fact.
