Merger and acquisition (M&A) activity has picked up again in the US container terminal sector, as investors look to low priced, low-risk options, according to Drewry Shipping Consultants.
A number of high profile deals have already been made this year, including the sale of APM Terminals’ Norfolk, Virginia terminal, while Deutsche Bank is said to be looking for a buyer for Maher Terminals, which it acquired back in the mid-2000s.
Most buyers are infrastructure and financial players – the same type of buyers that were most active in the mid-2000s – but their aims and motivations for buying are somewhat different today, says Drewry.
Despite this current boom, Drewry questioned why investors are still interested in US container terminal businesses since it’s a “mature market with relatively low, single digit growth prospects”. The terminals also operate in a country with amongst the most unionised and highest cost dock labour in the world, and EBITDA percentage margins are relatively low by world standards.
But, it seems there are several reasons for today’s enthusiasm, says Drewry. Firstly, acquisition prices for container terminal businesses are much lower today than they were in the boom period.
Secondly, whilst EBITDA margins of terminals are relatively low in percentage terms, the US has some of the highest terminal tariffs in the world, so the absolute EBITDA per box is significant, and the US represents a low-risk, stable place to invest.
Lastly, automation is gathering pace in US terminals, offering the chance to reduce labour costs by making capital investment instead.
Over the coming months, more M&A activity is expected as the continuing financial pressure on carriers may motivate more operators to sell stakes in their terminals, says Drewry. Buyers who invested in the mid-2000s are also looking to sell as funds reach maturity.
