Port of Tauranga makes first foray into South Island, with $21.6m PrimePort deal
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 aimed at strengthening the Tauranga site as a hub for coastal shipping.
The deal is subject to public consultation because PrimePort is 71.4 percent owned by Timaru District Council's investment arm. The process will start on Aug 17 and is expected to take a month.
Under the deal Port of Tauranga would 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.
"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."
The arrangements raise the possibility that Timaru could win back cargo lost primarily to Port of Lyttelton, including output from Fonterra Cooperative Group's Clandeboye plant, the world's second-largest dairy processing site.
That cargo was lost a year ago when global shipping lines Maersk and Hamburg Sud pulled the plug on the central South Island port, effectively scuppering Timaru's container business.
Timaru District Council is backing the proposal ahead of the public consultation, saying it would be "a giant boost" for PrimePort and the district.
Timaru District Holding's, the council's investment arm, also owns 47.5 percent of Alpine Energy, South Canterbury's power distribution network.
Shares of Port of Tauranga rose 1.1 percent to $14.45 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.