Shares in U.S. asset manager BlackRock (BLK) dropped today as the Chinese government threatened to pull the plug on its $22.8 billion Panama Ports deal with CK Hutchison (CKHUF).
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According to the Wall Street Journal, China wants state-owned shipping giant Cosco to be an equal partner and shareholder in the ports alongside BlackRock and Mediterranean Shipping Company (MSC). The proposed sale includes two ports at either end of the Panama Canal and more than 40 others around the world.
Floodgates are Open
BlackRock and MSC, which reached a preliminary agreement to buy the ports from Hong Kong conglomerate CK back in March, are reportedly open to Cosco taking a stake.
However, it is understood that a deal with Cosco will not be reached before the agreed-upon July 27 deadline for exclusive talks between BlackRock, MSC and CK.
Chinese officials have told BlackRock, MSC and Hutchison that if Cosco is left out of the deal, Beijing would take steps to block Hutchison’s proposed sale.
This won’t be too much of a surprise for BlackRock given that legal and regulatory hurdles are a key risk for the group.
Chinese Doubts
Bringing Cosco into the fold would not sit well with President Trump who has put a lot of political capital into ensuring that U.S. dominance over the Panama Canal is reasserted.
There is also the current trade and tariff spat between the two nations, as well as wider geopolitical concerns.
The Chinese government has also repeatedly expressed concerns about the deal since March. This has included slamming CK for betraying the Chinese people and being “spineless.”
It was concerned, and presumably still is, that the deal could hit China’s shipping and trade interests.
Its view will carry a lot of weight with the parties involved in the deal. That’s because BlackRock and Hutchison have business interests in China, and MSC is one of the biggest movers of Chinese products around the world.
Is BLK a Good Stock to Buy Now?
On TipRanks, BLK has a Strong Buy consensus based on 13 Buy and 1 Hold ratings. Its highest price target is $1,224. BLK stock’s consensus price target is $1,168.79, implying an 8% upside.
