Cosco bid leads to confusion

Piraeus Port Authority (OLP) was at the center of some confusion last week due to uncertainty over the size of the highest bid for its container station, submitted by China’s Cosco. The scant information provided by the Greek port company about the offer from the Chinese firm generated confusion in the markets of Athens and Hong Kong. The highest price expected had been 1 billion euros, so when it became known in late May that Cosco’s offer reached 4.3 billion, OLP’s stock registered gains of over 20 percent in just two sessions. When news of the super-high offer broke in China, Hong Kong bourse authorities immediately suspended trading in the Cosco stock and sought explanations from the company’s management about how it intends to make such a huge investment, whether it will proceed with a share capital increase and to what extent its capital adequacy will be affected by such a move. Last Wednesday, Cosco sent a stock filing to Hong Kong’s bourse clarifying that the amount it is offering for the Piraeus investment is just 500 million euros at today’s prices. Cosco explained that the amount of 4.3 billion euros in actual fact corresponds to the overall 35-year lease, factoring in the inflation of all these years. The firm added that if it wins the tender, its business plan will be funded by 250 million euros from borrowing and the rest from equity funds. On hearing this, the Hong Kong bourse allowed the resumption of trading in the stock. In Athens, the OLP administration was obliged to do some explaining and stated that «whichever way one reads the offer, the conclusion is the same» and that «the actual price to be paid over 35 years, including inflation and the 500 million euros – the theoretical value at today’s prices – would be 4.3 billion euros.» Brokerage companies in Athens clearly did not see things in the same way, as they had upgraded their target-price for OLP stock on the opening of the bids, before reducing it to the previous level after Cosco’s clarifications. Both OLP and its main shareholder, the Greek state, should therefore have supplied more detailed information about the project, stating both the current price and the one with 35 years of inflation factored in.