Canadian pensioners will be acquiring a significant interest in US ports with Toronto-based Canada Pension Plan Investment Board's agreement to pay $4bn for Ports America, the largest US ports operator, in a deal announed in a Friday 1 October release.
The $4bn sales price was revealed by a source familiar with the negotiations. The source was granted anonymity by Capital.com because the CPPIB and the seller, Los Angeles-based asset manager Oaktree Capital Management, agreed not to discuss details of the transaction.
Oaktree is an affiliate of another Canadian investment giant, Brookfield Asset Management.
Deal includes Port America’s debt
The deal, slated to close in the fourth quarter of this year, includes 100-year-old Ports America’s outstanding debt.
With the acquisition, CPPIB is wagering that Ports America has a strong, long-term future based on US consumer demand in spite of recent supply-chain bottlenecks that have plagued the country’s ports.
“We’re confident that (Ports America) has got a lot of growth ahead of it, based on the premise that US consumers have still got lots of wind left in their sails – for some time to come,” said Frank Switzer, the CPPIB’s managing director of investor relations. “It’s basically a good bet on the purchasing power of US consumers.”
CPPIB portfolio contains about $520bn in assets
The CPPIB investment portfolio includes global investments in public and private equities, real estate, and fixed-income assets. The Canadian pension fund was last valued at approximately $520bn in June 2021. The holdings include a 34% stake in Associated British Ports.
New Jersey-based Ports America ranks as North America’s largest marine terminal operator with operations in 70 locations in 33 ports across the US. The company handles 13.4 million twenty-foot equivalent units (TEUs), including 10 million tons of general cargo, 2.5 million vehicles and 1.7 million cruise ship passengers.
“We share a long-term vision for Ports America (with the CPPIB) and are excited to grow our capabilities and service offerings to position the company for another century of innovation, leadership and success,” said Ports America CEO Mark Montgomery.
Several projects in pipeline
Switzer said the deal gives the CPPIB exposure to a high-quality, long-term concession in robust and growing markets.
“Ports America has several projects in its pipeline,” Switzer said. “Two examples are the Ports Chesapeake expansion (in Baltimore, Maryland) and the Port Newark container terminal (in New Jersey). And, we think there are also some opportunities to align some commercial and operational improvements,” he said.
The board decided to acquire full control of Ports America after previously owning a 9.4% stake. Switzer said the board, which began investing in Ports America in 2014, has come to know the business well.
“What we’ve learned is that Ports America has transformed from a largely low-margin terminal stevedoring operator to, now, a major terminal operator in the U.S.,” Switzer. said. “It’s got scale, it’s got long-term focus, and we’re very confident that it can drive value creation for our Canadian pension beneficiaries.”
“We think the management team is very strong, and we’re looking forward to working with them for some time to come,” he said.