Distressed properties available at bargain prices.
Included in the current market basket of US assets for sale could be some infrastructure-related holdings of AIG like the port terminal and stevedoring operations AIG's Ports America Inc. acquired in 2007 after DP World was forced to divest of US-based assets acquired in its purchase of P&O Ports.
When the US government effectively nationalized AIG through a loan agreement that gives it roughly an 80% stake in the insurance giant, the goal was to facilitate an orderly reorganization rather than a chaotic bankruptcy breakup of the varied assets. Among those assets are the leases at six US ports (Newark, Baltimore, Philadelphia, Miami, Tampa and New Orleans) and stevedoring at 16 locations. Where those assets go, trouble seems to follow.
The 2006 acquisition of P&O Ports by DP World, the Dubai-based port management company that is partly owned by the government of the United Arab Emirates, caused a major uproar in the US, which clearly caught the new owners off guard. The orderly transfer of the British-owned P&O Ports became a tense standoff with US legislators threatening action and calls for investigations into the vetting process that allowed the deal to proceed.
Ports America, Inc. (an affiliate of AIG Global Investment Group) acquired the North American operations and immediately faced a new challenge from the Port Authority of New York and New Jersey that wanted AIG to commit to $84 million in order to transfer the lease for the Port of Newark Container Terminal. AIG, through Ports America, agreed to make capital expenditures of a minimum of $50 million in the Port Newark Container Terminal (PNCT) during the life of its investment, including $10 million earmarked for the Port Authority's development of port rail infrastructure surrounding PNCT.
In another area of the country, DHL is still working out details of its exit from the Wilmington Air Park in its deal to outsource domestic air lift that was managed by ABX and Astar Air Cargo to UPS. DHL Global Express CEO John Mullen testified before a Congressional committee that the move, part of a restructuring of its North American express operations, follows over $5 billion of investments since 2003 and does not involve the $400 million in incentives DHL was promised from the State of Ohio. In fact, he said, DHL has only realized a benefit of about $5.6 million of the incentives the State of Ohio estimated to be worth over $422 million.
The German-owned DHL could probably argue that its foreign ownership subjected it to far more scrutiny than a US-owned firm would have to endure under similar circumstances.
One serious question raised by all of these events is the perception it creates for potential foreign investors. After decades reducing or eliminating barriers to commerce, supply chains operate efficiently and cost effectively on a global scale. Investments in the underlying logistics networks and infrastructure have flowed relatively unrestricted. Is that about to change?