Report: Under Pressure from China Hutchison Will Delay Panama Terminal Sale

Balboa Panama port — Reports are that Hutchison will delay the signing of the definitive sale agreement for the terminals in Panama (Hutchison file photo)

The controversial deal by CK Hutchison to sell its two port operations in Panama is reportedly going to be delayed. The South China Morning Post and Chinese-controlled newspapers are reporting that the target date of April 2 for the signing of definitive documentation will not proceed but also said this does not mean the deal is canceled.

Chinese officials later confirmed that the State Administration for Market Regulation would be reviewing the transaction. The South China Morning Post reports that the officials said the review was to “ensure fair competition in the market and safeguard the public interests.” Bloomberg adds that the review will be looking for potential security or antitrust violations.

Hutchison on March 4 announced that it had reached principal agreements with a consortium of U.S.-led BlackRock and MSC Mediterranean Shipping Company’s TiL group which owns and operates terminals. The total deal valued at $23 billion is for the sale of 80 percent interest in terminals in 43 ports in 23 countries outside China operated by CK Hutchison. In a parallel agreement, Hutchison said it would sell 90 percent interest in the Panama company that operates the terminals in Balboa and Cristobal, Panama at each terminus of the Panama Canal.

Hutchison said that “fundamental and essential terms” of the two transactions had been agreed in principle, subject to definitive documentation. It reported that the definitive documentation for the Panama portion of the transaction was expected to be signed on or before April 2. It also entered into exclusive negotiation and non-disclosure arrangements with the BlackRock-TiL consortium.

Chinese officials reacted negatively to the news of the sale as they saw it as U.S. intervention and worried about threats to Chinese shipping and trade. According to the media reports, China has been increasing the pressure on CK Hutchison including reports this week that the government had ordered that there be no new deals with Li Ka-shing, the Hong Kong billionaire who controls Hutchison, and his family.

Panama which has also been under pressure from the United States announced that it would be reviewing the transaction. Previously Panama had moved to review the contract with Hutchison and the Panama government filed notice that it was withdrawing from China’s Belt & Road initiative.

Media reports in Asia suggested that behind-the-scenes talks were happening between the company and government officials in Hong Kong. Hutchison has declined to make public comments and also canceled a planned briefing with investors after its year-end financial report.

Trump has hailed the deal for the Panama terminals and took credit with BlackRock for making it happen. MSC has remained quiet about the deal letting BlackRock be the center of attention in the media reporting on the transaction.