CPPIB to Become Owner of Largest US Terminal Operator
CPPIB will acquire Ports America, a 100-year-old New Jersey company with 70 locations in 33 ports on the U.S. west, east and southern coasts, from current owner Oaktree Capital Management LP. Oaktree is an affiliate of Canadian investment giant Brookfield Asset Management Inc.
A source familiar with the transaction said the deal values Ports America at more than US$4-billion, including its outstanding debt. The Globe is not identifying the source because the parties had agreed not to publicly disclose the price, the source said.
CPPIB was a minority owner of Ports America prior to Wednesday’s announcement, thanks to a 10-per-cent stake in the company obtained when it provided a loan to the company in 2014.
Global supply chains have been deeply disrupted by COVID-19, and container shipping via boat has not been exempt. Shipping rates have skyrocketed as containers and vessels have been in short supply, or simply not in the right place at the right time.
Those problems, coupled with rising nationalism and pushback over free-trade disagreements, have led some to question whether there will be a rebirth of domestic industrialism that will reshape global trade as we have known it.
To CPPIB, however, much of this is short-term noise, which it rejects because it considers itself a multidecade investor, said Scott Lawrence, CPPIB’s head of infrastructure.
The investment represents the coming together of two CPPIB theses: Global supply chains are creating greater efficiency in the manufacturing and distribution of consumer goods and the U.S. consumer has a voracious appetite and ability to consume. “Those two trends marry up, and we believe there will be long-term growth for decades to come,” Mr. Lawrence said. Mr. Lawrence said “we spent a lot of time looking at this investment, disaggregating the signal from the noise, and focusing on the long-term drivers and supports for global trade. We believe those forces are still very strong.”
Mr. Lawrence also said the seven-year minority ownership stake allowed CPPIB a front-row seat to Ports America management, which Mr. Lawrence called “exceptional and world class ... We’ve had the good fortune of not showing up cold to assess this from the outside looking in - we’ve been in the tent, so to speak, for seven years and on the board for the last couple of years.”
Ports America annually handles 10 million tons of general cargo, 2.5 million vehicles and 1.7 million cruise ship passengers. It’s currently expanding operations in Chesapeake, Va. and Newark, N.J.
Sohini Podder and David French of Reuters also report that Canada's CPPIB to buy Ports America from Oaktree to further its infrastructure push:
Canada Pension Plan Investment Board (CPPIB) said on Wednesday it had agreed to buy Ports America, one of the largest marine terminal operators in the United States, from investment firm Oaktree Capital Management LP.
While no valuation was given in the announcement statement, the deal values Ports America at over $4 billion, according to two sources familiar with the matter.
The transaction comes amid heightened interest in logistics, with supply-chain disruption in focus as the global economy recovers from the paralysis caused by the coronavirus pandemic.
"There are lots of tail winds for logistics assets writ large, but our approach is for the long term and so this type of strategic ports asset will be important to the U.S. for decades to come," Scott Lawrence, head of infrastructure at CPPIB, said in an interview.
Under the terms of the deal, which is expected to close by the end of the year, the Canadian pension manager will take full ownership of Ports America.
CPPIB had previously held a 9.4% stake in Ports America. The pension fund also owns a 34% stake in Associated British Ports, as well as stakes in toll roads, utilities and digital infrastructure providers in the Americas, Europe, Asia and Australia, according to its website.
Alternative asset manager Oaktree has controlled Ports America since 2014, when it acquired Highstar Capital and the infrastructure-focused investor's funds, which included the Jersey City, New Jersey-based ports operator.
"Ports America's growth, track record of innovation and strong financial profile have positioned the company for success in today's cargo management and terminal operations environment, and we fully expect the business will only benefit from this new ownership structure," said Emmett McCann, managing director and co-portfolio manager of Oaktree's Infrastructure Investing strategy.
Founded a century ago, Ports America has operations in 70 locations across 33 ports in the United States. It currently handles 13.4 million twenty-foot equivalent units (TEUs) annually, which includes 10 million tons of cargo, 2.5 million vehicles and 1.7 million cruise ship passengers.
Nate Tabak of FreightWave also reports that a Canadian pension fund to acquire Ports America:
The Canada Pension Plan Investment Board is set to become the full owner of Ports America, the largest U.S. terminal operator, after agreeing to acquire Oaktree Capital Management’s stake.
The price and terms of the acquisition were not disclosed. But Bloomberg reported that the deal, announced Wednesday, valued New Jersey-based Ports America at $4 billion.
Ports America operates terminals at 33 U.S. ports, including Los Angeles; New York-New Jersey; Savannah, Georgia; and Houston. CPPIB, which operates as CPP Investments, has been a minority shareholder since 2014.
The pension fund said it plans to support the future growth of the port operator.
“Ports America represents the opportunity to continue to invest in a high-quality operator that plays an important role in global trade, making the company a good fit for our long-term infrastructure investment strategy,” Scott Lawrence, CPP Investments’ managing director and head of infrastructure, said in a statement.
CPP Investments has over $400 billion in assets under management and is one of the world’s largest private equity investors. It oversees investments for the Canada Pension Plan, which serves more than 20 million Canadians.
Ports America adds the pension fund’s significant supply chain investments, including Indian 3PL Delhivery, and the firm that operates Highway 407 Electronic Toll Route in Ontario.
CPPIB put out this press release on the deal:
Canada Pension Plan Investment Board (“CPP Investments”) today announced that it has entered into a definitive agreement to become the 100% owner of Ports America (“the Company”), North America’s largest marine terminal operator, through the acquisition of an interest from funds managed by Oaktree Capital Management, L.P. (“Oaktree”).
CPP Investments has been an existing minority investor in Ports America since 2014 and will continue to support the business with long-term capital and continuity of ownership as the Company deepens its focus on providing safe, secure and efficient service for all of its shipping line and beneficial cargo owner customers.
Since its founding in 1921, Ports America has driven a century’s worth of innovation in stevedoring, cargo handling, and best-in-class terminal operations. Today, Ports America is the largest terminal operator in North America, with diversified operations across the country, including 70 locations in 33 ports on each of the United States’ three coasts. The Company annually handles 13.4 million twenty-foot equivalent units (TEUs), including 10 million tons of general cargo, 2.5 million vehicles and 1.7 million cruise ship passengers. Ports America employs a highly trained workforce with expertise in providing premium and flexible terminal operations and stevedoring services across these categories.
“Ports America represents the opportunity to continue to invest in a high-quality operator that plays an important role in global trade, making the Company a good fit for our long-term infrastructure investment strategy,” said Scott Lawrence, Managing Director, Head of Infrastructure, CPP Investments. “Terminal operators play a crucial role as cargo demand and transportation requirements continue to grow in response to the rapid and dynamic changes in how individuals and businesses are buying and selling products. Through further investment, Ports America can continue to meet these needs and we look forward to working with CEO Mark Montgomery and the management team to support the growth of the business in the upcoming years.”
“At Ports America, our commitment and ability to provide our customers with excellent, safe service and long-term, strategic value informs everything that we do,” said Mark Montgomery, Chief Executive Officer at Ports America. “Our partners at Oaktree and CPP Investments have always shared that commitment, and we look forward to continuing our work with the support of the CPP Investments team as they increase their ownership stake. We share a long-term vision for Ports America and are excited to grow our capabilities and service offerings to position the Company for another century of innovation, leadership and success.”
“It has been a privilege to work alongside Mark and the entire Ports America team for the last 12 years, and our conviction in the strength of the business has never been stronger,” said Emmett McCann, Managing Director and Co-Portfolio Manager of Oaktree’s Infrastructure Investing strategy. “Ports America’s growth, track record of innovation and strong financial profile have positioned the Company for success in today’s cargo management and terminal operations environment, and we fully expect the business will only benefit from this new ownership structure.”
The transaction is subject to satisfaction of certain closing conditions and regulatory requirements and is expected to close by the fourth quarter of 2021.
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At June 30, 2021, the Fund totalled C$519.6 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.
About Ports America
Ports America is the largest marine terminal operator in North America with operations in 70 locations and 33 ports across the United States. The company is a leader in technology driven solutions and covers a wide range of supply chain services including container, RoRo, breakbulk, military, and cruise ship operations. Ports America is based in Jersey City, New Jersey.
About Oaktree
Oaktree is a leader among global investment managers specializing in alternative investments, with $156 billion in assets under management as of June 30, 2021. The firm emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in credit, private equity, real assets and listed equities. The firm has over 1,000 employees and offices in 19 cities worldwide. For additional information, please visit Oaktree’s website at http://www.oaktreecapital.com.
Reading these articles can be a little confusing because Oaktree bought Highstar Capital in 2014 and Oaktree was bought out by Brookfield, so there were multiple owners of Ports America.
Anyway, this is a fantastic acquisition by CPPIB and its infrastructure team headed by Scott Lawrence.
I can't say I am surprised, CPPIB already had a seat at the table and industry insiders told me it was only a matter of time before they were gong to make a bid for this prized asset.
Why only a matter of time? Look at some of the major deals that have taken place in the container terminal industry.
In 2019, Blackstone Infrastructure Partners announced a growth-oriented investment in Carrix, one of the World’s Largest Marine Terminal Operators:
Blackstone (NYSE:BX) today announced that funds affiliated with Blackstone Infrastructure Partners (BIP), have made a growth-oriented investment in Carrix, the largest marine terminal operator in the U.S. and in the Americas. Terms of the transaction were not disclosed.
Carrix is the parent company of SSA Marine and its related affiliates with combined operations at over 250 port and rail locations worldwide, including 16 container terminals in Long Beach, Oakland, Seattle and Tacoma, Panama, Mexico, Chile, Colombia and Vietnam.
“We are pleased that BIP has invested in Carrix and will be working with us to continue our on-going growth and development,” said Jon Hemingway, Chairman of Carrix. “Along with its affiliates, BIP brings an amazing network of highly skilled and experienced people, global relationships, expertise in a diverse array of businesses, and myriad capabilities to apply. When combined with our experience in the port industry and infrastructure development, we have substantially broadened what our shareholders and directors can do to support Carrix and its management team.”
“Since its founding in 1949, the Carrix team has built the leading ports business in the Americas, with a strong track record of growth and innovation,” said Sean Klimczak, Global Head of Infrastructure at Blackstone. “We are excited to partner with the two existing shareholder families to support the expansion of Carrix. This platform investment fits well with our strategy of developing partnerships with industry leaders behind whom we can continue to invest additional capital for decades to come.”
The transaction is expected to close by the end of April.
About Blackstone
Blackstone is one of the world’s leading investment firms. We seek to create positive economic impact and long-term value for our investors, the companies in which we invest, and the communities in which we work. We do this by using extraordinary people and flexible capital to help companies grow. Our asset management businesses, with $472 billion in assets under management, include investment vehicles focused on infrastructure, private equity, real estate, public debt and equity, non-investment grade credit, real assets and secondary funds, all on a global basis. Further information is available at www.blackstone.com. Follow Blackstone on twitter @Blackstone.
About Carrix
Carrix is the world’s largest independent, privately-held marine terminal operator, with activities at more than 250 terminal facilities and rail operations throughout geographies in the U.S., Canada, Mexico, Central America, South America, Asia, New Zealand and South Africa. Since its founding in 1949, Carrix has continued to grow, always focusing on its customers’ interests. Recently, a subsidiary of Carrix completed a major expansion of its Oakland International Container Terminal, providing a 284 acre facility with 5 continuous berths and will include 10 Post-Panamax container cranes ready to handle the largest vessels calling at the port. Other affiliates of Carrix are working on significant expansion projects in several geographies, including the recently announced Blount Island Marine Terminal in Jacksonville. Carrix is also the parent company of other businesses that provide marine and rail terminal management.
When it comes to infrastructure, Sean Klimczak, Global Head of Infrastructure at Blackstone has an excellent reputation, so it's worth tracking his moves.
In another deal, back in 2018, Ontario Teachers’ Pension Plan (OTPP) sold stakes in GCT Global Container Terminals Inc (GCT) to IFM Investors and BCI. Post-deal, IFM Investors owned 37.5% of GCT, while BCI owned 25% of GCT. OTPP still holds a 37.5% stake in GCT.
Details of this deal can be found here:
Ontario Teachers’ Pension Plan (“Ontario Teachers”), IFM Investors (“IFM”) and British Columbia Investment Management Corporation (“BCI”) have announced that they have entered into a transaction whereby IFM and BCI will each join as equity partners in GCT Global Container Terminals Inc. (“GCT”), a leading container terminal operator in North America. Ontario Teachers’ will continue to hold 37.5 per cent of GCT, with IFM acquiring a 37.5 per cent holding and BCI acquiring 25 per cent. The transaction is subject to customary and required regulatory approvals and consents.
Headquartered in Vancouver, GCT operates four Green Marine certified terminals in two principal North American ports. Through GCT USA on the East Coast, the company operates two award-winning facilities: GCT New York on Staten Island, NY and GCT Bayonne in Bayonne, NJ. On the West Coast, GCT Canada operates two gateway terminals: GCT Vanterm and GCT Deltaport in Vancouver and Delta, BC.
IFM Investors is a global institutional funds manager with US$81 billion under its management as of March 31, 2018. IFM was established more than 20 years ago and is owned by 27 Australian pension funds.
Ontario Teacher's was diversifying its infrastructure holdings back then but it still holds an important stake in GCT Global Container Terminals Inc. (“GCT”).
My point is very simple, post-pandemic, it has never been so good for container shipping industry and terminal operators servicing them.
Blackstone was right to acquire Carrix and BCI and IFM were right to acquire a stake in GCT Global Container Terminals.
And CPPIB is definitely right to acquire Ports America outright, but I want to stress, this is a long-term play, not just based on the explosive growth we are currently seeing as people work from home and order stuff online.
It's also worth remembering that times weren't always great for container terminal operators.
Before the Great Financial Crisis of 2008, these terminal operators enjoyed 30 years of growth based on global trade and demand for container ships.
But when the GFC hit, business fell by 30% at all these terminal operators and many large investors had to inject capital in them to keep them afloat.
Still, if you take a very long view of the industry, it looks very promising and there's a confluence of secular themes which Scott Lawrence mentions in the first article:
The investment represents the coming together of two CPPIB theses: Global supply chains are creating greater efficiency in the manufacturing and distribution of consumer goods and the U.S. consumer has a voracious appetite and ability to consume. “Those two trends marry up, and we believe there will be long-term growth for decades to come,” Mr. Lawrence said. Mr. Lawrence said “we spent a lot of time looking at this investment, disaggregating the signal from the noise, and focusing on the long-term drivers and supports for global trade. We believe those forces are still very strong.”
Along with Highway 407, this will represent a major infrastructure investment for CPPIB, just under 1% of total assets.
In other related news, today I learned that Alain Carrier, senior managing director and head of international at CPP Investment Board, is leaving the organization to head up Bregal Investments:
Alain Carrier, senior managing director and head of international at CPP Investment Board, is leaving the organization to become the global CEO of global private equity firm Bregal Investments, the pension fund said on Tuesday.
Carrier joined the investment board in 2008. Prior to that, he was a managing director at Goldman Sachs.
John Graham, president and CEO of the CPP Investment Board, said the organization has benefited from Carrier’s expertise, abilities and leadership for almost 13 years.
“He was a critical driver of our international strategy — which continues to be a priority for the fund — working across the enterprise to build a strong local presence and relationships, everywhere we operate,” Graham said in a press release.
Geoffrey Rubin, senior managing director and chief investment strategist at the CPP Investment Board, will take over international operations on an interim basis, along with his current role. Carrier will work with Rubin during the transition process.
Carrier’s last day at the CPP Investment Board is Oct. 22.
The organization is currently assessing potential longer-term leadership candidates in accordance with its ongoing succession process.
A number of sources tell me "it was a very difficult decision for him" and I am surprised because he was a contender to be CEO eventually (there are a few contenders, not just him, a testament to CPPIB's great bench strength).
Still, being named CEO of Bregal Investments is nothing to sneeze at:
Bregal Investments (“Bregal”) is pleased to announce the appointment of Alain Carrier as its Chief Executive Officer, with effect from 1 January 2022. Alain will succeed Co-CEOs Steve Black and Quentin Van Doosselaere, who are stepping down at the end of the year after a long-planned retirement. Alain will join Bregal in mid-November to ensure a period of transition.Alain joins Bregal from Canada Pension Plan Investment Board (CPP Investments), where he has been Senior Managing Director & Head of International since 2016, responsible for the company’s international markets and offices including in Europe, Asia and the Americas. Alain joined CPP Investments in 2008 as Managing Director for Europe and oversaw the establishment of CPP Investments’ London office. He later became Global Head of Infrastructure and Head of Europe. Prior to CPP Investments, Alain spent more than ten years in the Investment Banking team at Goldman Sachs in New York and London. He started his career as an attorney at Sullivan & Cromwell in New York.
"Alain is a highly respected leader in the industry, and I am confident that he is the right person to take Bregal through its next stage of growth, attracting more investors aligned with our private equity platform’s purpose-led values. Alain will be building on the work that Quentin, Steve and the Bregal fund managers have done over the past nine years, and I look forward to welcoming him very soon. Since their appointment as Co-CEOs, Quentin and Steve, along with their senior team of professionals at Bregal Investments, have transformed the firm, expanding its strategies, recruiting exceptional teams and adding new blue-chip Limited Partners to the platform. I would like to thank them both for their partnership over the years and wish them the very best in the future."
Boudewijn Beerkens, CEO of COFRA Holdinging
Alain Carrier said of his appointment: "Bregal has some of the industry’s best investment professionals and I am delighted to join them with a view to further growing the platform and developing complementary strategies. I have always been a firm believer in the fundamental role private equity can play in generating both financial value and positive impact for society and the planet, and I look forward to accelerating that within Bregal."
I'm confident Alain will be a great CEO, has tons of incredible experience and knowledge to step into this new and exciting role.
Below, watch this (2016) corporate video on Ports America. This will be a great long-term investment for CPPIB and its 20 million+ members.
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