Port investment - paying the right price?

Potentially the pinnacle for terminal investment activity was reached in the last decade (will see if we map deal flow from Infra News). (Abbott Point Coal Terminal reached 30x EV/EBITDA in 2011 and Ports of Botany and Kembla 25x in early 2013, all in Australia). This trend reflected increased awareness from the investment community (notably pension and infrastructure and sovereign wealth funds) of how ports represented an attractive asset class, able to generate stable cash flows and in the right strategic location exhibit monopolistic characteristics and pricing power.

The North Europe and Mediterranean region was part of the frenetic activity that generated very high EV/EBITDA multiples making some terminals seem expensive. As a result of this past activity, UK landlord ports are almost exclusively owned by financial investors - ABP (Hermes, CPPIB, Borealis and Wren House), Forth Ports (Arcus), Peel Ports (R-Reef) PD-Ports (Brookfield) – and they still demand a premium, as the 2015 sale of Goldman Sachs’ 30% share in ABP proved when it attracted a 15x multiple. These are in-demand assets.

In North Europe and the Mediterranean area, city, regional or central governments retain control of the port authority with individual terminals are operated by private companies under concession. This has attracted global strategic operators, like Hutchison Ports and DP World able to leverage volumes through their global footprint or operators owned by the carriers (e.g. APM Terminals/Maersk Line, Terminal Link/CMA CGM and TiL/CMA CGM) able to bring an anchor client.  

However notable exceptions exist like the Macquarie-backed Greenfield development of DCT Gdansk, a shareholding in Euroports held by Brookfield, Antin and Arcus, JP Morgan’s purchase of Noatum Ports from ACS Dragados in 2011 and the recent purchase by IFM Investors of the Akfen joint shareholding with PSA in MIP at Mersin Turkey.  

Yet the question remains whether potential deals on the table will see similarly high multiples and are worthy of the investment? Well, there continues to be a healthy degree of activity across different sectors.

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