Goldman Sachs acquires 49% equity stake in SSA Marine
Investment bank Goldman Sachs said late Thursday it has purchased a 49 percent stake in SSA Marine, becoming the latest example of institutional investors wading into the maritime sector during the past year.
Terms of the deal between Goldman Sachs Infrastructure Partners, a large fund created a year ago to invest in large infrastructure projects, and SSA’s holding company Carrix were undisclosed. Seattle-based Carrix, which also owns terminal management and planning software provider Tideworks Technology, is privately held by the Hemingway and Smith families.
Jon Hemingway, chief executive of Carrix, will continue to run the company and Ricky Smith will stay as chairman of the board, according to an SSA official.
SSA Marine is the largest American-owned marine terminal operator, with 120 marine and rail operations worldwide, including 11 container terminals in Los Angeles-Long Beach, Oakland, Seattle, Panama, Mexico and Chile. Last year the company handled 22 million containers, including inland, intermodal rail facilities it runs. The deal leaves SSA as the only major U.S. terminal operator in private hands.
With so much capital pouring in from private equity funds to other competitors in the field, the deal gives SSA the financial resources to pursue technology and expansion projects.
Late last year SSA entered into a joint venture partnership to develop and operate three berths at Cai Lan Port, in Vietnam’s Quang Ninh province at an estimated cost of $100 million. The three parties will also develop and operate logistics operations throughout Vietnam. Last September, the Vietnamese government approved an SSA joint venture to develop and operate a container terminal at Cai Mep, in the Ba Ria-Vung Tau province, to support container traffic in the Ho Chi Minh City area.
SSA is also interested in developing terminals in the northern part of the country and elsewhere in Asia, the official said.
SSA operates Panama’s Manzanillo International Terminal on the Atlantic end of the Panama Canal. It recently added six gantry cranes, refurbished its administration building, extended one berth and added a new roll-on/roll-off berth, and extensive yard handling equipment at a cost of $100 million. The company is interested in expanding operations to the Pacific side of the canal as well, according to the SSA source.
In May, SSA Marine said it reached an agreement with an Indian tribe to develop and operate a privately funded, $300 million container terminal on the East Blair Waterway near the Port of Tacoma. The terminal, which is projected to be built in four to five years, will have two berths.
SSA has also indicated it would participate in the bidding for the Punta Colonet megaport construction project in Mexico.
“Carrix has an experienced, industry leading management team with a proven track record and manages a world-class portfolio of high-quality, core infrastructure assets. Further, the company has a significant number of important new projects in the pipeline, and we are excited about the prospect of getting them to the operational stage and expanding the company's assets,' said Steven Feldman, co-head of the Goldman Sachs Infrastructure Investment Group, in a statement.
Goldman Sachs previously led an unsuccessful bid for Associated British Ports in the United Kingdom, and served as the financial advisor to the state of Indiana on the privatization of the Indiana Toll Road and to the city of Chicago on the concession for the eight-mile Skyway.
Infrastructure has suddenly become a hot investment vehicle in the United States, none more so than marine cargo terminals due to the steady returns and projections for continued strong growth in international trade.
Last year Dubai Ports World, now the third-largest global terminal operator, purchased the global operations of London-based facility operator P&O Ports for $6.8 billion. Under heavy political pressure to keep marine gateways under American ownership, DP World divested its U.S. holdings in a sale completed earlier this year to insurance conglomerate American International Group (AIG) for a sum widely speculated to be well in excess of $1 billion.
The Ontario Teacher’s Pension Plan this year bought four terminals in Canada and the United States, including two in the Port of New York-New Jersey, for $2.35 billion (20 times pre-tax earnings) from Orient Overseas (International) Ltd., the Hong Kong-based parent company of container shipping line OOCL.
A unit of Deutsche Bank just closed on a deal to acquire privately held Maher Terminals Inc., the largest container operation in the Port of New York and New Jersey.
AIG’s global investment arm agreed in May to buy Marine Terminals Corp. with facilities primarily on the West Coast to complement its East coast P&O (now called Ports America) terminal presence. The sale is expected to close this summer. MTC like SSA is a family-owned business. Terms of the deal were not disclosed, but an investment consultant who specializes in freight industry mergers and acquisitions said he has heard through the industry grapevine that AIG paid $2 billion for MTC — a multiple of 30 more than earnings before interest, taxes depreciation and amortization, which is used as a measure of cash flow.
In April, AIG said it would purchase AMPORTS, a provider of port-side automotive processing services in North America.
MacQuarie Infrastructure Partners, an investment fund run by Australia’s largest bank, recently purchased the Halterm facility in Halifax, Nova Scotia, and had a purchase agreement with privately held APTL Terminals Ltd. to acquire 100 percent of Fraser Surrey Docks, a container and breakbulk terminal on the main arm of the Fraser River in Vancouver, Canada.
Germany's TUI AG, parent company of shipping line Hapag-Lloyd, in February sold an 80 percent stake in the Montreal Gateway terminal to the investment arm of Morgan Stanley.
The recent acquisition activity in the port infrastructure arena has involved financial investors buying terminal operating companies and then retaining most of the top management to run the facilities for them. The SSA deal differs in that control of the company will be retained by the current owners, but with the financial muscle of Goldman Sachs behind them. Without any integration issues that often follow corporate mergers, SSA expects to retain all of its top management. Port authorities are also less likely to seek financial compensation of some sort because the terminal leases they issue are not being transferred to another entity. The Port Authority of New York and New Jersey sought compensation before approving sales of terminals to AIG and Ontario Teacher's Pension Plan.
The high valuations in the port sector forced SSA last year to explore sale and acquisitions opportunities, including, according to some reports, the P&O Ports North America business. It tested the waters for potential buyers but then officially took itself off the market.