DP World is selling its assets in two container terminals and a logistics centre in Hong Kong for US$742 million (Dh2.72 billion) as it seeks to free up cash to invest in faster-growing markets.
The Dubai-based ports operator will sell 75 per cent of its interest in CSX World Terminals Hong Kong, which operates Berth 3 of the Kwai Chung Container Terminal (CT3) and ATL Logistics Centre Hong Kong, which is located alongside CT3. DP World is also selling 100 per cent of its interest in Asia Container Terminals Holdings, which operates Container Terminal 8 West, it said in a statement on the Nasdaq Dubai website yesterday.
“We believe Hong Kong will continue to be a very interesting market. However, our presence was very small relative to the market,” said Sultan Ahmed bin Sulayem, the chairman of DP World.
It is the latest sale by DP World in more mature markets as it seeks to strengthen its focus on rapidly emerging markets. In recent months, it has sold stakes in the Russian container terminal Vostochnaya Stevedoring, the British-based Tilbury Container Services as well as operations in Belgium. It also exited from its business in Australia more than two years ago.
Goodman Hong Kong Logistics Fund, an Australian property investment trust, will buy DP World’s stakes in CT3 and ATL. The $463m deal will involve a strategic partnership in which DP World will continue to manage the port operations. Upon regulatory approval, the sale is expected to be completed by the end of the first half of this year.
DP World said it closed yesterday the $279m sale of its 55.17 per cent interest in Asia Container Terminals to Hutchison Port Holdings Trust, a Singapore-listed container port business trust.
Hong Kong’s importance as a trans-shipment destination in the Asian-Pacific region has waned in the past decade as more deep-sea ports open in China’s mainland.
“DP World doesn’t need to sell but ultimately it will allow it to deliver faster growth through its strategy of focusing on markets accelerating more quickly,” said Mark McVicar, the head of transport at Nomura Holdings. “It has sold assets where it can’t see a lot of growth but deliver stable cash flow, which are attractive to infrastructure investment funds.”
As of the end of 2012, the value of DP World’s Hong Kong assets was $653m, and they contributed $39m to the company’s gross profit.
Combined, the transactions valued the company’s assets at almost 15 times earnings before interest, taxes, depreciation and amortisation, making the deal “very attractive” for DP World, said Yuvraj Narayan, the chief financial officer.
Growth in DP World’s container handling slowed to 2.4 per cent last year as choppy conditions in the global economy and capacity constraints buffeted performance. But it remains optimistic for this year as it plans to open new facilities in Brazil and the United Kingdom.
The company’s stock on Nasdaq Dubai rose 0.76 per cent to close at $13.2 yesterday.