In an address to the nation on Tuesday, US President Donald Trump vowed that his administration would reclaim the Panama Canal, promising to fulfil a promise to retake the critical juncture that connects the Atlantic and Pacific oceans.
“We’ve already started doing it,” he said, nodding to a “large American company” that had agreed to take over two major ports at either end of the passageway “just today”.
Trump was well aware of the deal — BlackRock’s $22.8bn takeover of 43 ports owned by billionaire Li Ka-shing’s CK Hutchison, including two at either end of the Panama Canal — before it was announced on Tuesday. Both he and top members of his administration, including Marco Rubio, had been briefed by Larry Fink, BlackRock’s own billionaire chief executive.
Fink proved to be a critical player in a transaction that lacked many of the hallmarks of a multibillion-dollar acquisition. While some of the biggest names in the buyout industry took a look at the port portfolio — including Blackstone and KKR — the usual hordes of Wall Street advisers were not on hand. Blackstone and KKR declined to comment.
The transaction underscores the power Trump’s words have come to exert on global commerce and the speed with which companies’ most powerful executives are responding to his wishes.
The deal was being mapped out in CK Hutchison’s home territory of Hong Kong within days of Trump taking office after he said in his inaugural address that “China is operating the Panama Canal . . . and we’re taking it back”.
That pledge prompted senior executives at CK Hutchison to take action, said two people with knowledge of the matter. It had become clear that the exposure was likely to become a larger and larger problem.
Crucially, they decided it would be unwise just to sell the politically sensitive Panama ports. Instead, the company — whose share price had fallen 40 per cent in the five years running up to the deal’s announcement — saw a chance to turn the situation to its advantage.
By taking the drastic step of exiting vast swaths of the ports business that has been a central part of its identity since the 1990s, the group has removed itself from Trump’s crosshairs and struck a deal that boosted its struggling share price by more than 20 per cent on Wednesday. The deal will bring in $19bn of cash, according to CK Hutchison, some of which is likely to be handed to shareholders through dividends or buybacks.
Talks to seal the acquisition were swift, lasting just weeks and largely negotiated over video conference and telephone calls. They were driven by some of the biggest names in finance in Hong Kong and New York.
Goldman Sachs helped oversee a speedy and largely informal sale process that secured expressions of interest from several of the world’s largest infrastructure investors, according to a person familiar with the matter. Michael Corbat, who has kept a low profile since stepping down as Citigroup chief executive in 2021, was a key broker advising CK Hutchison from his base in Jackson Hole, Wyoming.
BlackRock was joined in its bid by Global Infrastructure Partners, the private infrastructure investment company it purchased last year; and Terminal Investment Limited (TIL), a ports operator backed by GIP and the world’s biggest container shipping line, Mediterranean Shipping Company (MSC).
The negotiations went right to the top of each group, including Fink at BlackRock, GIP chief executive Adebayo Ogunlesi and Li Ka-shing himself, as well as his son Victor.
Diego Aponte, a scion of the ultra-wealthy Aponte family behind MSC, also played a crucial role, according to two people with knowledge of the talks. The shipping giant already had a close relationship with CK Hutchison’s port business as one of its top customers. That working relationship bolstered the BlackRock consortium’s bid.
CK Hutchison “knew it was going to another billionaire family that they trusted”, one person briefed on the negotiations said, referring to the Aponte family. “And they knew the power the BlackRock name had.”
The deal caught industry analysts off guard. Bank of America described it as “a major surprise” with the price tag between 11 and 13 times the company’s estimated 2024 earnings. For JPMorgan Chase analysts, it marked a “significant strategy shift”. After the deal, the ports segment would only account for 1 per cent of CK Hutchison’s total earnings before interest, taxes, depreciation and amortisation, JPMorgan estimated.
Ports have “historically been an important part of their business,” said Dan Baker, a senior equity analyst at Morningstar who covers the company. “The port business is something that is generally pretty profitable, hard to enter; once you’ve got a port it’s hard to get competition in there,” he said. “This was one of their strongest businesses.”
The deal does not include CK Hutchison’s ports in Hong Kong and mainland China — the sale of which might have been politically fraught and would have required, at least, a time-consuming regulatory approval process.
“It is quite possible that they [BlackRock] wouldn’t have wanted those ports [in China],” said Baker. “If you are a western owner of a port in China, you’d probably think that may not be such a great strategic position for you. I am not even sure whether China would want that.”
Only five months after completing its purchase of GIP, the infrastructure investment has already delivered on Fink’s big ambition to put BlackRock at the fore of private markets.
For CK Hutchison, cash from the deal could top up its war chest for new acquisitions — it has made a nonbinding offer for the UK utility company Thames Water — as well as be used to appease shareholders.
“Management’s probably a little bit frustrated with where the share price is,” said Baker. “This is one way of realising value.”
Additional reporting by Arash Massoudi in London