President Trump may be handed a major geopolitical victory concerning the Panama Canal, as a new report indicates that a BlackRock-led consortium has agreed to purchase key ports near the canal currently operated by Hong Kong-based conglomerate CK Hutchison Holdings Ltd. The report follows Trump's repeated warnings about China's growing influence over the strategic waterway and comes one month after US Secretary of State Marco Rubio criticized the Panamanian government for allowing Beijing to expand its influence in the region.
Bloomberg provided more color on BlackRock's deal to purchase the critical ports near the canal:
The agreement was reached alongside a deal in principle for BlackRock and its Global Infrastructure Partners unit, along with Mediterranean Shipping Co.'s ports division, to acquire units that hold 80% of the Hutchison Ports group, which operates 43 ports in 23 countries, the company said Tuesday in a statement.
The consortium will also acquire 90% of Panama Ports Co., which operates the two entryways in Balboa and Cristobal. CK Hutchison said it would receive cash proceeds of about $19 billion from the broader ports deal.
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The deal includes the bulk of CK Hutchison's ports division, which produced 20% of the conglomerates earnings before interest and tax in the first half of last year and was the company's third-biggest business.
The port deal represents the largest infrastructure deal in BlackRock's history after it purchased Global Infrastructure Partners last year, marking a new move for the asset manager in critical infrastructure investing across developed and emerging markets.
Earlier, BlackRock CEO Larry Fink told the RBC Capital Markets conference audience that the port deal was a great opportunity and highlighted the company's "long relationship" with CK Hutchison.
Public forensics analysis of CK Hutchison shows several key risk factors, including forced labor concerns and high political exposure to Chinese state-owned enterprises.
Here's the upstream ownership profile of CK Hutchison Holdings. Notice some familiar names? Yes, BlackRock, hence Fink's comment at the RBC conference...
Here is more color on those direct owners and shareholders of the HK-based holdings company.
Trump's concerns about Beijing's encroachment on the canal may soon be diminished after the BlackRock deal (as we've previously noted). Trump has complained that China has jeopardized US national security interests in the region. Hutchison's potential link to the Chinese Communist Party is shown above.
Latin America Research Professor Evan Ellis with the US Army War College told Bloomberg, "Hutchison could see the writing on the wall, that strategically it was best for them as well for Panama to pursue its interests elsewhere."
Risa Grais-Targow, director for Latin America at Eurasia Group, said the BlackRock deal to purchase the HK-owned ports and "diminish Chinese footprint in Panama" is a massive positive.
BlackRock told Bloomberg that the acquisition of the ports would require government approval. This might not be difficult to secure given the Panamanian government's urgent need to ease tensions with Trump.
