WITH the US and China locked horns over trade tariffs, speculation is
mounting as to why US regulators have not yet approved Cosco Shipping's
takeover of a Long Beach terminal through its acquisition of Orient
Overseas Container Line (OOCL).
Shares of OOCL's parent Orient Overseas (International) Ltd ended
trading at a 12 per cent discount earlier this week to Cosco's offer
price of US$63 billion, reflecting investors' concern that the Committee
on Foreign Investment in the United States (CFIUS) might block the
deal, reports IHS Media citing Alphaliner.
Confirming to Alphaliner that it is discussing US terminal assets
with CFIUS officials, Cosco, a China government-backed carrier, said it
is confident the deal will pass US review and that the deal's June 30
deadline will be met.
The deal has been approved by the European Union, passed the US
Hart-Scott-Rodino antitrust review and a review by Cosco shareholders,
but still needs approval from two Chinese regulators. Currrently, Cosco
owns a 46 per cent stake in the Pier J Terminal (PCT) in Long Beach and a
100 per cent stake in Pier 100-102 West Basin Container Terminal (WBCT)
in Los Angeles.
Cosco's lease at PCT, which is jointly owned with SSA Marines (44
per cent) and CMA CGM (10 per cent), is due to expire in 2022. The lease
at WBCT is believed to expire in 2038, according to Alphaliner. The
WBCT lease was acquired by Cosco in 2016 from China Shipping Container
Rising trade tension between the United States and China, along
with fresh memories of how US politics discouraged DP World's takeover
of six US terminals, is sparking questions, nonetheless.
On March 12, the Trump administration blocked Singapore-based
chipmaker Broadcom's attempt to buy Qualcomm, the largest US mobile
chipmaker, citing security issues tied to the United States' ability to
build a 5G network while China pursues the same goal.
Alphaliner said the main issue within the regulatory review is
OOCL's Long Beach Container Terminal, as Cosco would take on the 40-year
lease expiring in 2052, valued at $4.6 billion. Cosco already controls
two separate container terminals in the Los Angeles-Long Beach/San Pedro
Following pushback from US Congress over port security issues,
United Arab Emirates (UAE)-based terminal operator DP World spun out the
operating leases at six US ports it gained through its acquisition of
UK-based P&O Ports. UAE-based Gulftainer gained a 35-year terminal
lease at the Port of Canaveral, Florida, in 2015, despite some local
pushback and US Republican Duncan Hunter of California requesting the
then-Obama administration to scrutinise the deal for security
Mr Hunter, who is under federal investigation for using political
funds for personal use, chairs the House subcommittee overseeing port
security, was an early House President Donald Trump supporter, and urged
the blocking of Broadcom's acquisition of Qualcomm.