First hurdle fall

Parochialism is being blamed for the Port of Tauranga’s withdrawal from formal discussions with Ports of Auckland on a potential merger. However, keen not to appear too dismissive, Tauranga has tellingly left the door open for a resumption of talks.

Tauranga’s statement said it was now twelve months since the merger was proposed by Ports of Auckland, and that since then both ports had invested a significant amount of time and money considering its merits.

However, Auckland Regional Holdings, the owners of Ports of Auckland, had been unable to decide whether the merger was worth undertaking, or the terms on which it would be prepared to pursue a merger. So reluctantly, the Port of Tauranga withdrew from the discussions.

Undoubtedly, both port managements (and Tauranga’s shareholders) see benefits accruing based on the economic and financial modelling they have done.

However, the stumbling block appears to be the terms of the ownership split.The original proposal was that Auckland would own a third of the merged port, with Tauranga a third and private investors the remaining third.

However, as the Auckland political shareholders began to see things differently, the deal began to look wobbly. When Maersk announced in late November that its northern hub port would be Auckland rather than Tauranga, Mike Lee, chairman of the Auckland Regional Council, immediately stated that Auckland should now command a bigger slice of the proposed megaport. He said the Maersk decision “highlights the unacceptability”of a three-way equal shareholding. “I don’t think we could put Ports of Auckland in a minority situation …It would be a majority share for the larger contributor,”he said.

Since then other carriers have chosen to put more trade through Tauranga instead, which changes the underlying value still further.

Faced with this volatile scene,Tauranga decided that sound business case or not, it would pull out – while saying it was still available for talks should the opportunity to merge arise in the future.

From the other side, Auckland Regional Holdings, the infrastructure arm of Auckland Regional Council, said a resumption of formal merger talks was possible and it was continuing its analysis of the business case for a merger.

Chief operating officer Peter Casey said it was “not an unlikely scenario” that formal merger talks would resume. “We’re pursuing it with vigour and diligence. This is a big proposal.”

So far, there has been no further word from either side.