Yilport seeks majority control of Ports America
LLOYD’S LIST, MAY 6, 16
Yilport seeks majority control of Ports America
by Janet Porter –
Chairman Robert Yildirim in second round of negotiations with Highstar in move that would give Turkish entrepreneur a firm foothold in the US ports. Turkish terminal operator Yilport is bidding to buy a majority stake in Ports America in a move that would give the fast-growing group a firm foothold in the US. The Istanbul-headquartered ports company is now in the second round of the sales process, chairman Robert Yildirim confirmed to Lloyd’s List. Yilport has been linked to Ports America for a few weeks, but until now it was thought that Highstar Capital was only interested in selling a minority stake in its US ports operation, initially said to be 23%. However, Mr Yildirim has made it clear he would not accept anything less than a 51% shareholding in Ports America, and could be willing to buy 100% control if the price were right. “I want to be in the driving seat so that I can make all the necessary investments in terms of equipment, infrastructure, software and business relationships,” said Mr Yildirim. “In order to do that, I need to have majority control.” No details of the financial discussions between Highstar and potential Ports America buyers have been released, although Lloyd’s List understands that a valuation of well in excess of $2bn has been put on the group by its owner. Yilport is thought to be the only industrial investor in the running, with the other bidders all believed to be financial institutions. Originally, a deadline of late May had been set by Highstar for binding offers, but it is unclear whether that is still the case. Ports America and Highstar have not yet replied to queries about whether a shareholding disposal in excess of 50% would be considered. Lloyd’s List reported a few weeks ago that Highstar was seeking new outside investors for Ports America to help finance expansion opportunities in the US. The process started late last year, with Highstar at that stage planning to retain a sizeable stake in the US stevedore and terminals operator. Canadian pension fund CPP acquired a 10% equity stake in Ports America a couple of years ago. Ports America was created from the former P&O Ports’ US portfolio by Highstar, which combined it with Marine Terminals Corp in 2007 to form a business with a presence in more than 40 US ports. Stevedoring services include container, bulk, breakbulk and project cargo, cruise terminals, and ro-ro operations. The group is headed up by former senior Maersk executive Michael Hassing, who joined Ports America in 2010. Although Highstar Capital entered into an agreement with private equity giant Oaktree in 2014, with the latter subsequently becoming the manager of the Highstar Fund 1V, Ports America is part of a separate fund that remains under the control of Highstar. It is thought that Ports America’s recent decision to place its loss-making Outer Harbor facility in Oakland into Chapter 11 protection from bankruptcy was taken in anticipation of Highstar’s plans to dilute its current 90% interest. Should Yilport not succeed in buying Ports America, it could be interested in APL’s US terminals in Los Angeles and Dutch Harbor, Alaska. CMA CGM is in the process of buying APL but has said it may dispose of some of the Singapore line’s port assets in order to help finance the deal. Although a major CMA CGM shareholder, Mr Yildirim said he was not involved in day-to-day operations and did not know what decisions had been made by the French line about which terminals to sell. Nevertheless, he ruled out any interest in APL’s Asia port assets. “But if the price was right, I would be interested in the two terminals in the US,” he said in a telephone interview. Yilport’s interest in Ports America is part of an ambitious expansion plan with the ultimate aim of becoming a top 10 international ports and terminals operator by 2025. Yilport must acquire on average two new ports a year to reach that position, said Mr Yildirim, but is currently well ahead of target. He reckons Yilport is currently ranked about number 17 in the world, after taking into account some consolidation activity. In terms of container throughput measured by equity share, Yilport handled around 2.5m TEU in 2015, a figure expected to grow to between 3.6m TEU and 3.8m TEU after acquisitions. A few days ago, Yilport acquired the remaining shares in Sweden’s Gävle Container Terminal as part of a 30-year concession at the Scandinavian port. Under the agreement, Yilport, previously holding an 80% stake in GCT, will gain the Gävle Municipality company Baltic Sea Gateway and will be responsible for the operation of all port related services, including containers, bulk, general cargo and rail. Earlier in the year, Yilport finalised its takeover of Portuguese port management company Tertir for €300m ($330m), a deal that will see the company double the number of terminals in its global portfolio. Yilport is in negotiations to buy a chemicals terminal in Turkey, is about to sign a deal with the Ecuador government for another port concession, and is also looking at ports in Brazil. On average, Mr Yildirim has allocated between $100m and $200m annually to new port investments and related expenditure, but at times it may be considerably more, as it will be in 2016, particularly if the Ports America deal comes off. The need for scale reflects what is happening in the container trades, where the global carriers are consolidating into powerful groups that have much greater purchasing clout collectively than on an individual basis. Ports and terminals on the other side of the table need to be large in order to be able to meet the investment requirements of their customers as ship capacities get bigger, and handle the global networks of the top carrier groups, while also being able to stand up to the lines when negotiating fees, said Mr Yildirim. “In order to be in the game, you need to be an international terminal operator,” said Mr Yildirim. Those port operators that only have a single terminal or just a few “have no power to negotiate with the big monster container lines”.