Canada Pension Plan Investment Board is making a big bet on U.S. consumers’ thirst for imported goods with a multibillion-dollar purchase of the country’s biggest operator of ports.
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 South 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 transaction details, the source said.
CPPIB was a minority owner of Ports America prior to Wednesday’s announcement, holding a 10-per-cent stake obtained when it provided a loan to the company in 2014.
Global supply chains have been deeply disrupted by COVID-19. 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 production that will reshape global trade as we have known it.
To CPPIB, however, much of this is short-term noise, which it ignores 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.
“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 gave 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.
Emmett McCann, co-portfolio manager of Oaktree’s infrastructure investing strategy, said Oaktree acquired Ports America through its 2014 acquisition of private-equity firm Highstar Capital. The company made acquisitions over the years that required significant integration and capital investment, and Oaktree ultimately brought in new management, he said.
“We had got to a place where the company was in a really steady state, transformed from a [collection of companies] to a pure, core infrastructure business that’s perfect for someone like CPPIB, that can take the company to the next level and not just look three, four or five years out, but 30, 40, 50 years out.”
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