CMA CGM Buys Los Angeles Container Terminal Operator
Bolstered by record profitability from the surge in container shipping, the major carriers are deploying the free cash flow being generated to move forward aggressively with their long-term business plans. In the latest move, French shipping major CMA CGM Group announced it was reacquiring a terminal operator in Los Angeles that the shipping company sold four years ago to pay down debt.
“The swift recovery of the global economy has demonstrated the importance of ports and logistics infrastructure,” said Rodolphe Saadé, Chairman and CEO of the CMA CGM Group, announcing the acquisition. “In order to manage efficiently our port operations on the West Coast of the United States, we have decided to acquire Fenix Marine Services. It is a key industrial facility which will significantly strengthen our position and support our rapid growth in this market.”
Under the terms of the agreement, CMA CGM will acquire a 90 percent stake in the Fenix Marine Services currently held by EQT Infrastructure III, a real estate investment group set up for the 2017 divestiture of the terminal operator. CMA CGM currently holds a 10 percent stake in the company.
The terminal was acquired as part of the 2016 acquisition of Neptune Orient Lines by the French company. As part of the acquisition, CMA CGM agreed to divest the terminal operator to reduce debt incurred as part of the overall acquisition. Four years ago, the deal placed an enterprise value of approximately $875 million on the terminal operator while the new transaction is based on an enterprise value of $2.3 billion.
In announcing the transaction, CMA CGM said that it was part of its strategy of developing its terminal business as the company moves to become a more complete provider of shipping services to customers. The group currently has investments in 49 port terminals in 27 countries.
Further, the acquisition of the third-largest terminal operator at the Port of Los Angeles will support CMA CGM’s longer-term plans to expand its U.S. shipping business including the introduction of larger containerships. “By 2022, the FMS terminal will welcome the first CMA CGM liquified natural gas-powered 15,000 TEU ships to be deployed on routes between Asia and the United States,” the announcement noted.
Currently, Fenix handles approximately 2.5 million TEU annually. It operates four large berths each with more than 1,000 feet in length and a draft of 50 feet. They service containerships with a total of 16 cranes, a 292-acre yard, more than 700 reefer plugs, and an eight-track railhead.
CMA CGM is planning a significant investment to expand the facilities. Among the plans are the addition of a fifth berth, extension of the container yard, expansion of the rail capacity, and continuing the terminal’s digital transformation.