China Merchants Port Holdings to provide US$968 million to Terminal Link joint venture
The deal involves CMPort subscribing to a US$468 million Mandatory Convertible Bond (MCB) and providing a US$500 million secured term loan facility
China Merchants Port Holdings (CMPort) has agreed to provide US$968 million in funding to its Terminal Link joint venture with CMA CGM, as the French container shipping giant raises cash for its full takeover of Swiss freight forwarding company CEVA Logistics.
In June 2013, China Merchants acquired a 49% stake in Terminal Link, the owner of stakes in 13 container terminals worldwide.
Under the terms of a recent Memorandum of Understanding, CMPort will subscribe to a US$468 million Mandatory Convertible Bond (MCB), and also provide a US$500 million secured term loan facility.
The interest and principal under the loan facility will be funded primarily by a share capital increase of Terminal Link subscribed by CMA CGM.
The cash raised will be used by Terminal Link to acquire additional stakes in 10 ports currently owned by CMA CGM.
The funding exercise gives CMA CGM US$968 million in cash, which it needs to complete its full takeover of CEVA Logistics. CMA CGM will continue to be the majority partner in Terminal Link with 51%.
Any change in this ownership arrangement would likely prompt a review by the European Union, which would be sensitive to a Chinese majority stake.
The ports which Terminal Link already owns are Houston and Miami in the US, Montoir, Le Havre, Dunkirk and Fos in France, Thessaloniki, Antwerp, Tangier, Casablanca, Marsaxlokk in Malta, Abidjan in Ivory Coast, and Busan in South Korea.
CMA CGM is the world’s fourth-largest container shipping company. Over the past two years, it has built a stake in CEVA, and now wants full control. CEVA remains unprofitable, and CMA CGM has said that it might not achieve profitability until 2023 at the earliest. The company has pushed back some of CEVA’s financial targets, partly because of a slowdown in some industries such as auto manufacturing.
A US$725 million bridge loan put in place for the CEVA deal has already been mostly paid down with the proceeds of a series of sale and leaseback transactions on CMA CGM vessels. The company aims to complete US$860 million in sales and leasebacks. Additional funding will come from the sale of a 50% stake in a logistics hub in India for US$93 million. Another US$100 million will be raised via more securitization transactions backed by CEVA's receivables.
The funding agreed with China Merchants brings the total raised to complete the CEVA takeover to around US$2 billion. CMPort is listed on the Hong Kong Stock Exchange. In a statement to the HKEX, CMPort said that in line with the successful partnership initiated in 2013, the proposed acquisition constitutes a unique opportunity to expand Terminal Link’s network and gain exposure to a sizeable portfolio of terminals located in regions with strong growth prospects. It will enhance or gain presence in a mix of regions covering Asia, Europe, the Middle East and the Caribbean.
CMPort and CMA CGM will now work together to finalize negotiations and agree on the definitive terms of the formal agreements to be entered into as soon as possible.
4 Dec 2019