CK Hutchison Shares Surge After Panama Ports Stake Sale to BlackRock

CK Hutchison Holdings Limited (CKHUY) shares jumped as much as 25% to HK$48.20 early Wednesday, putting it on track for its biggest one-day gain since 2015. The surge came after a consortium led by BlackRock agreed to buy majority stakes in ports on either end of the Panama Canal, which President Trump had raised as a security concern because of the ports' connection to China.

The deal, worth $22.8 billion, also includes dozens of other ports around the world. The agreement, which will see the sale of most of CK Hutchison's port businesses outside of China, was at a higher than expected valuation, according to Dan Baker, senior equity analyst at Morningstar. He added in a note that "selling off assets at favorable prices" will help support shares which had been trading well below their valuation for many years. Morningstar raised its fair value estimate on the stock by 10% to HK$67.

"The disposal would be significantly value-enhancing" for CK Hutchison, and the expected $19 billion in cash proceeds from the sale could be put toward debt repayment, Citi Research analysts George Choi and Timothy Chau said in a note. This could help bring the company's net gearing, or net debt to equity, below 20%, they estimate.

The deal appears to mark a retreat from international port operations by Hutchison, which is controlled by Li Ka-shing, one of Asia's richest people. The group, which faced pressure from officials in the U.S. and Panama to divest itself of the Panama ports, will retain its ports in Hong Kong and in mainland China while selling control of 43 ports comprising 199 berths in 23 countries.

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