MELBOURNE: The multi-billion-dollar auction for the Port of Melbourne has come down to a three-way race with bidders lodging indicative bids yesterday morning for one of the biggest privatisations in Australia this year.
Sources said the sale of the 50-year lease to operate Australia’s largest container port had boiled down to three consortia, with one of the trio a Chinese bid from Zhejiang Port in conjunction with Citic.
The indicative bids for the 50-year lease were delivered electronically and by hard copy to Morgan Stanley’s Melbourne office in a strictly monitored process.
The other two consortia are, as reported previously, Macquarie Infrastructure, IFM Investors and Dutch fund APG (advised by Macquarie Capital), and the Queensland Investment Corporation/Borealis Infrastructure/Global Infrastructure Partners bid advised by Credit Suisse and Gresham.
It follows the withdrawal of the Hastings bid with Kuwait-based Wren House and Canada’s Alberta Investment Management Corporation. One well-placed source said Hastings had a lot on its plate after winning the $10.3 billion Transgrid bid and was already invested in ports through the Port of Newcastle deal with China Merchants.
Close watchers of the Asian infrastructure space said Zhejiang Port was not regarded as a top-tier port operator, but it had the backing of the Citic CLSA, part of China’s biggest conglomerate, with local assets extending from iron ore mines to soft commodity trading in Australia in an advisory capacity.
Sources said the Chinese bid had real expertise, but on information that had surfaced so far, it may be hampered by the lack of a top-tier Australian partner.
Local partners are considered an important step in most major privatisations because they provide local knowledge and help placate regulators and politicians anxious about being seen as selling assets to offshore investors. Treasurers Joe Hockey and Scott Morrison have both blocked foreign takeovers — GrainCorp by Archer Daniels Midland and S Kidman & Co to China’s Pengxin Group — while the sale of Darwin Port to China’s Landbridge provoked a political and defence row.
Port of Melbourne has a book value of $4.1bn but is estimated to be worth about $6bn in a heated market for infrastructure assets, with buyers around the world bidding up prices to secure the predictable income they produce.
Asciano, which represents a riskier operator model of infrastructure in stevedoring and rail than their landlord port operators, attracted competing bids from an international array of sovereign, infrastructure and pension funds.
But observers said the long-running bid tied up a lot of resources at the likes of Singapore sovereign wealth fund GIC, the British Columbia Investment Management Corporation and the Qatar Investment Authority, making it less likely they could participate in the Port of Melbourne auction.
A price over $6bn would easily top the $5.07bn paid for Port Botany in Sydney and Port Kembla 80km south, sold together by the NSW government in 2013 to a consortium led by IFM Investors.
The Australian’s DataRoom column previously reported doubts that Melbourne would achieve the same high multiple as the Port of Newcastle — which at $1.75bn sold for more than double initial estimates in 2014. That represented a multiple of 25 times, similar to the Ports Botany and Kembla sale and below the 27 times multiple received by Global Infrastructure Partners for a minority stake in the Port of Brisbane.
But Melbourne is a container hub and the busiest port in Australia because of its dual role servicing Victoria and Tasmania, which most international shipping lines leave off their Australian routes.
It is also the third leg of the main shipping route along the east coast that includes Brisbane and Sydney.
Observers said the price hinged on bidders’ view of growth in the nation’s gross domestic product and trade flows, with Australia increasing manufactured imports from cars to clothes as its manufacturing industry declined and growing food and commodity exports to fast growing middle-class consumers in the region.
