China has concluded another big deal in global logistics with the US$924m dollar purchase of a Brazilian port terminal company.
China Merchants increased its equity holding in TCP Participações S.A to 90%, giving the Chinese company effective control over the port complex at Paranaguá to the south of the industrial city of Curitiba in southern Brazil.
The deal was announced at a ‘BRICS’ conference in Xiamen, with the president of China, Xi Jinping, citing it as an example of effective cooperation between Brazil and China.
The statement from China Merchants described TCP as being the “not only known as the second largest Container Terminal of the Country, but also the only container gateway of the region……. the existing port is -12.3 meters deep with a quay length of 879. It also has 3 Container Berths and 33 Hectares of depot with a capacity of 1.5million TEUs, the capacity is expected to increase to 2.4million TEUs after further expansion. The throughput volume of TCP in 2015 and 2016 are 0.82 and 0.76million respectively.”
The price of R$2.9bn agreed with the investment companies that had previously owned the port was not exceptionally high, with the news agency Reuters suggesting a price-to-earnings ratio of 14.9. This is towards the lower-end of the valuation range that Drewry Shipping Consultants cite as the present price of such assets. The deal is also another step in the extensive acquisition spree that Chinese logistics companies of various sorts have embarked on at a global level. It has been rumoured that other port companies have been discussing investment in TCP for over a year.
Certainly Brazil needs investment in infrastructure. Whilst the ports sector is regarded as being one of the more advanced parts of the economy, it suffers particularly from bottlenecks in its landside transport provision. The worst problems appear to be encountered at the large agri-bulk terminals in the north and along the Amazon, but with China Merchants’ clear intention to expand at Paranagua, it will have to engage with this issue as well.
Source: Transport Intelligence, September 9, 2017
Author: Thomas Cullen
