Orient Overseas nets $2.41 billion for North American terminals

Orient Overseas sells four North American terminals to Ontario TeachersÆ Pension Plan Board for $2.41 billion.
Orient Overseas International Limited (OOIL) announced on Friday a transaction to sell its North American terminals division to the Ontario TeachersÆ Pension Plan Board (OTPPB). OOIL has sold 100% of the division for $2.35 billion in cash. The acquirer will also assume $60 million in debt.

Nicholas Sims, CFO of OOIL said: ôThis transaction provides substantial benefits to both OOIL and the terminals division. OOIL has realised significant value for its shareholders, and the terminals division has secured a long-term owner who is focused on infrastructure assets with the ability to further enhance growth.ö

The transaction is subject to shareholder approval. OOIL is owned 52.19% by the family of former Hong Kong CEO, Tung Chee-hwa, through the company Tung Holdings. Tung Holdings will be voting in favour of the deal. OOIL said it would crystallise the use of proceeds by the time the transaction received regulatory approval in first quarter 2007 and would consider ôexpansion of the core businesses of the group and mechanisms for returning capital to the shareholders such as special dividends and share repurchasesö.

The core business of OOIL, which is headquartered in Hong Kong, is container liners operated by its wholly owned subsidiary Orient Overseas Container Line (OOCL). OOCL is a container transport and logistics services provider with more than 230 offices in 58 countries. In addition, OOIL is involved in other terminal operations and investments, as well as property investment and development.

OOILÆs terminals division operates as a stand-alone profit centre. It comprises four container terminals located in North America: TSI Terminal Systems, which operates two container terminals in Vancouver; New York Container Terminal in Staten Island; and Global Terminal in New Jersey. For the unaudited 12-month period ending June 2006, OOIL's terminals division had revenue of $444.3 million and Ebitda (earnings before interest, taxation, depreciation and amortisation) of $99.8 million.

OTPPB is an independent corporation responsible for investing a C$96 billion ($84.6 billion) fund and administering the pensions of OntarioÆs 163,000 elementary and secondary school teachers and 101,000 retired teachers.

Pension funds and private equity players are the new generation of acquirers for container terminals businesses which yield steady cash flow returns. In September, Macquarie Bank acquired a 40% stake in South KoreaÆs Hanjin Terminals, at a price which valued the terminals business at around $870 million. It followed this, in November, by acquiring CanadaÆs Halterm Income Fund, whose main asset is a container terminal and cargo handling facility in Nova Scotia.

OOIL shares had been suspended on the Hong Kong Exchange since Wednesday. They resumed trading on Friday to close at HK$45.20 ($5.81), up 22%.

OOIL announced in July it would conduct an auction for the terminals division. UBS acted as sole financial advisor to OOIL.
¬ Haymarket Media Limited. All rights reserved.