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 Lines.
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 Bay area.
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 implications.
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.
Sources:schedule
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