Shares in BlackRock (BLK) strengthened today despite China wanting a sizable stake in its $22.8 billion Panama Ports deal with CK Hutchison (CKHUF).
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Thirds Please
According to a report in the Financial Times, China’s state-owned shipping giant Cosco is aiming to secure at least a 20%-30% stake in the proposed deal alongside BlackRock and Mediterranean Shipping Company (MSC).
The proposed deal includes two ports at either end of the Panama Canal and more than 40 others around the world.
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. But this is the first time the potential size of that stake has been revealed.
Last month, CKH had announced that the exclusive negotiation period with the consortium led by BlackRock and Mediterranean Shipping Company (MSC) had expired, and it intended to invite major strategic investors from mainland China to join as key members of the consortium.
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 – see above.
Trump At Sea
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 a 5.03% upside.
