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(Bloomberg) -- A BlackRock Inc.-led consortium agreed to buy control of key ports near the Panama Canal from Hong Kong-based conglomerate CK Hutchison Holdings Ltd. after pressure from US President Donald Trump to limit Chinese interests in the region.
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The deal is a major victory for Trump, who had argued without evidence that China had taken over the critical waterway and that the US was paying too much for the passage of ships. He previously demanded that the fees charged on US naval and merchant ships to be lowered, or else Panama should return the canal to the US.
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.
The deal also removes a headache for billionaire Li-Ka-shing’s CK Hutchison. As recently as January, it said it was committed to continue operating in the country, but has faced increased scrutiny amid Trump’s threats. Panama’s government had been weighing whether to cancel the company’s contract, Bloomberg reported last month, and had also initiated an audit.
The transaction represents the largest infrastructure deal in BlackRock’s history after it bought infrastructure specialist GIP last year in a push further into private markets. BlackRock shares fell as much as 3.4% to $933.34 in New York, slumping along with the rest of the market amid an escalating trade war. CK Hutchinson’s American depositary receipts jumped as much as 19.7% to $5.95.
BlackRock Chief Executive Officer Larry Fink, speaking at an RBC Capital Markets conference, said the deal was a great opportunity for the asset manager and highlighted the company’s “long relationship” with CK Hutchison.
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. In its most recent results, the ports units outside of China and Hong Kong produced HK$17.8 billion ($2.3 billion) in first-half revenue and HK$6.25 billion in Ebitda. Ports across Asia, Australia, Panama, Mexico and the Middle East saw a 33% jump in profit in that period.