COCSO Shipping has agreed to place Long Beach Container Terminal into a trust pending a sale as part of a “National Security Agreement” with the US that addresses its concerns arising from COSCO’s purchase of OOIL.
The sale of OOIL, which includes the new Long Beach Container Terminal (LBCT) at the Port of Long Beach, had been held up after the US administration referred the deal to the Committee on Foreign Investment in the United States (“CFIUS”). CFIUS has not published a report on its investigation, but COSCO has reported to its shareholders that the US required COSCO SHIPPING to divest of LBCT to, as COSCO put it, a “suitable, unrelated party” that is acceptable to the US Departments of Homeland Security and Justice.
COSCO, Shanghai International Port Group Co. (SIPG) and OOIL have agreed that, as soon as COSCO SHIPPING secures ownership of more than 50% of the shares in OOIL, OOIL will transfer ownership of LBCT into an irrevocable US Trust, controlled by a US Citizen as the principal trustee, who will oversee the sale of LBCT to a party that meets the requirements of the National Security agreement.
LBCT is required to “continue to serve its customers and operate the LB Terminal Business consistent with its practices prior to the Transaction” in the meantime. It must also continue OOIL’s support for the ongoing Middle Harbour Redevelopment Project that includes completing the new LBCT terminal and redeveloping the old terminal area.
It will be interesting to see who emerges as a buyer for LBCT. OOIL invested heavily in the terminal, which is the only terminal in North America with an ASC and AGV system. OOCL signed a 40-year lease for the site in 2012, and the middle harbour development was budgeted to cost $1.2 billion when it began, but the actual cost is likely to have risen well beyond that. There reports that the terminal is worth US$1.5 billion today but OOIL is likely to be asking more than that figure.