Hong Kong-Based Orient Overseas Forced To Sell US Port For US$1.78 Billion

Orient Overseas
A container ship arrives at the a Port in the United States (Photo: Reuters)

After receiving heavy pressure from the United States government, the Hong Kong-based firm Orient Overseas has now agreed to sell its container port in California.

The Chinese investment holding company involved in international transportation and logistics raised concerns in the United States given that it is currently state-owned.

The company, which is currently controlled by Cosco Shipping, announced that it will be selling off its interest in its Long Beach Container Terminal for US$1.78 billion. The sale is part of an agreement the company had signed with the United States government. According to the stock exchange-listed company, listed under the ticker "OOIL," it should be able to get a net amount of US$1.29 billion from the sale.

Orient Overseas has owned the Long Beach Container Terminal for over three decades. The company was founded as a shipping business in Hong Kong by Chinese shipping magnate Tung Chao-Yung in 1969.

The United States didn't have any issue with the company owning the port in California until Cosco Shipping bought a majority-controlling share of the firm for US$6.28 billion in 2017. The majority stake raised red flags in the country, which was not too happy to have a state-owned port in US soil.

The US Departments of Homeland Security and Orient Overseas met on several occasions to discuss its position in the country. After months of negotiations, Orient overseas signed an agreement with the government agency, promising to sell its port to a suitable firm that the US deemed "acceptable."

The buyer of the port in California has been identified as an unlisted US fund called Macquarie Infrastructure Partners (MIP). The buyer is owned by Macquarie Infrastructure and Real Assets, which is one of the world biggest asset managers. It is also part of the financial conglomerate, Macquarie Group.

Orient Overseas' port in California is the second largest port in the country by volume. According to data from the World Shipping Council, over 6.8 million containers passed through the port in 2016, second only in volume to Los Angeles.

Following the announcement of the sale, share prices for Orient Overseas jumped by 3.5 percent. Share prices for its controlling shareholder Cosco Shipping also went up by 1.1 percent.

 Analysts have revealed that the sale of the port is actually the right move for both Orient Overseas and Cosco Shipping, given that it will remove any liabilities and uncertainties involving the particular asset. The sale will also provide the companies with much-needed cash, which can be used to further expand its shipping business elsewhere. 

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