Are we looking sexy?

In the UK, three of our biggest port operators – P&O Ports, PD Ports and Forth Ports – are engaged in various levels of acquisition approach and whilst P&O’s suitors are well-known global terminal operators, the others are subject to the admiring glances of institutional investors.

Two Australian contenders are strutting their stuff for PD Ports whilst a mystery private equity consortium is making eyes at Forth Ports. And, all this of course, follows hot on the heels of Peel Holdings’ recent acquisition of the Mersey Docks & Harbour Co, operator of the port of Liverpool, although in this case it was a private port/real estate group acquiring another listed port group.

For some time infrastructure, water and power utilities have been subject to the acquisitive attentions of financial institutions of one kind or another. Ports, it seemed though, rarely strayed onto their radar.

That’s changing fast. And with these changes more and more data will become available on the thorny subject of port valuations, and especially where stock market listings follow. A listing effectively gives a valuation and so too does an acquisition approach pitched at a listed company with a premium offered per share, as in the case of the DP World (DPW) offer for P&O.

It is, however, not just in the UK that the knowledge base on port valuations is being widened. Over the last year we have seen a significant number of Chinese port groupings declare their commitment to a Hong Kong stock market listing, notably Dalian Port Container Terminal Co, Xiamen International Port, Tianjin Port Development Holdings; and others like Qingdao are waiting in the wings.

Slowly but surely the number of listed ports is increasing and so too is activity in the resale market. One way or another, this is delivering to us much more information on the value of port businesses. In turn, the prices which port businesses are being valued at, and the increase in value achieved in them over relatively short periods, is proving attractive to financial institutions.

Schroeder Investment Management and Insight Investment Management, sizable investors in P&O for example, stand to make huge profits if the DPW deal goes through but as PS goes to press they had back-pedalled slightly on the P&O deal hoping to capitalise on perceived interest in P&O from Temasek Holdings of Singapore (see News Focus).

So as indicated above, the future promises more interest from pure financial investors in the maritime ports sector – Maquarie Bank of Australia is another example having just acquired the right to develop a new container terminal in Gdansk. It remains to be seen, but perhaps what the latter project will prove more than most is that while ports may be becoming the next sexy utility, acquiring a good business, or a new business with potential, is still highly dependent on doing your homework in terms of market analysis, cost of market entry, competition and all the other good old basic stuff.

Indeed, in this respect only time will tell if DPW, should it be successful with its bid for P&O, has got it right by making a £3.3bn (US$2.6bn) for P&O. Not everyone is convinced though.