Cosco Shipping clears US hurdle on Orient Overseas deal
Cosco Shipping Holdings Co. pledged to sell a container terminal in California, helping allay concerns of US regulators and clearing the way for its $6.3-billion acquisition of Orient Overseas International Ltd. announced last year.
The state-owned shipping giant signed a national security agreement with the US on July 6 to dispose of the Long Beach facility to a third party, according to a filing. The Committee on Foreign Investment in the US, known as CFIUS, was reviewing the transaction, which would shift ownership of the Long Beach terminal to Cosco from Hong Kong-based OOIL.
With the sale agreement, CFIUS has notified parties involved in the deal that there are no unsolved issues linked to US national security, according to Cosco’s filing, which didn’t elaborate on a buyer or valuation. Bloomberg Intelligence estimates the facility could be worth at least $1 billion.
“Cosco would have loved to have the Long Beach terminal but they bought OOIL more for what it could bring to Cosco,” Rahul Kapoor, a Bloomberg Intelligence analyst, said by phone Monday. “OOIL’s network, technology and customer base are the main reasons why Cosco bought OOIL.”
Under the accord with the depart- ments of Homeland Security and Justice, pending its disposal, the ownership of the terminal will be transferred to a trust, whose principal trustee must be a US citizen and not a shareholder of OOIL, and should be independent of Cosco Shipping as well.
The transaction had won a nod from China’s Anti-Monopoly Bureau about a week ago, removing the final obstacles to the creation of a container line that would become the world’s No. 3 by capacity after A.P. Moller-Maersk A/S and Mediterranean Shipping Co. Cosco’s acquisition of OOIL is part of a sweeping consolidation within the industry that has struggled with overcapacity, a plunge in freight rates and accumulated losses.
OOIL has been operating Long Beach’s Middle Harbor Terminal under a 40-year lease that started in 2012. It is one of the world’s most automated shipping facilities and its redevelopment is due to be completed next year. Port of Long Beach, together with the adjacent Port of Los Angeles, is the largest shipping facility in the US.
The stepped up scrutiny of Chinese takeovers of US assets comes as trade tensions between the world’s two biggest economies turned into a tariff war, with both the countries imposing levies on each other’s goods last week. Since the Trump administration took office last year, at least 10 Chinese deals for US firms have collapsed. (Bloomberg)