Port of Tauranga, New Zealand's busiest export port, has agreed to buy a half stake in PrimePort Timaru in a $21.6 million deal that will provide a shot in the arm for the South Island company that lost key shipping services last year.
Port of Tauranga will buy a 50 percent stake in PrimePort excluding its investment properties, lease PrimePort's container terminal for up to 35 years, acquire container terminal operating assets and create a new subsidiary, Timaru Container terminal, to operate the terminal, the company said.
The deal is subject to a month-long public consultation starting on Aug. 17 because PrimePort is 71.4 percent owned by Timaru District Council's investment arm. But the deal has already been welcome by the council, its investment arm and the port itself.
"It's a shot in the arm for the port, the community and South Canterbury, with a direct link to Tauranga and the world," said PrimePort chairman Roger Gower.
It also provides PrimePort with a strong partner as the Timaru facility looks to expand, he said.
PrimePort was dealt a blow last year when global shipping lines Maersk and Hamburg Sud stopped visiting the port, slashing its container business, while Fonterra Cooperative Group's Clandeboye plant, the world's second-largest dairy processing site, opted to rail its product to Port of Lyttelton even though it is closer to Timaru.
As a result, containers handled by PrimePort dropped to 20,000 from more than 80,000, leaving it "with a lot of latent capacity," Gower told BusinessDesk. The port cut 50 jobs last year.
He is hopeful Fonterra will look again at Timaru, especially given its close ties with the Tauranga port, the biggest export point for its North Island production. Port of Tauranga is currently dredging its facilities to make them big enough for a new generation of larger container vessels.
Port of Tauranga is likely to get three seats on the six-person PrimePort board. Under the deal, the port's investment land will be owned by Timaru District Holding's, the council's investment arm, and held for future port use.
"Port of Tauranga continues to invest in becoming New Zealand's hub port," said chief executive Mark Cairns in a statement. "We see opportunities to grow PrimePort Timaru as a marshalling point for South Island cargo."
Shares of Port of Tauranga rose 1.4 percent to $14.50 and have gained 8.7 percent this year. The stock is rated a 'sell' based on the consensus of six analysts surveyed by Reuters, with a median price target of $13.90. Lyttelton shares rose 3.6 percent to $2.90.