The author is a Reuters Breakingviews columnist. The opinions expressed are his / her own.

By Jonathan Guilford

NEW YORK, March 4 (Reuters Breakingviews) - The trade war is already sending merger troops to the front line. BlackRock BLK.N shook hands on a deal to buy ports along the Panama Canal and beyond from CK Hutchison 0001.HK for $23 billion. It helps boss Larry Fink shore up his infrastructure strategy and provides the Hong Kong-based conglomerate a useful escape from political crosshairs.

Completed under U.S. auspices in 1914, the vital shipping lane cutting across Central America has become one of President Donald Trump’s targets. He has alleged, without evidence, that China “is operating” the route and that the United States is “taking it back.”

CK Hutchison, which won rights to operate Panama’s Balboa and Cristobal ports in the 1990s, also faces scrutiny in Europe. The combined pressure creates unwanted headaches for tycoon Li Ka-Shing’s empire and probably adds to its sagging valuation. Although the ports it is selling account for less than 10% of revenue, it will pocket an amount nearly equivalent to its entire market value.

The deal seems like a welcome reprieve for other reasons, too. Panamanian authorities are planning to audit CK’s contract while the country’s attorney general deemed the concession “unconstitutional.” Frank Sixt, CK’s co-managing director, said the transaction is “wholly unrelated to recent political news,” but the statement is as striking as the valuation.

BlackRock, its Global Infrastructure Partners unit, and Terminal Investment Limited agreed in principle to acquire Hutchison Ports Holding’s 80% interest in 43 ports across 23 countries. HPH’s 90% interest in two Panama ports also is included. CK Hutchison is to retain its Greater China operations.

Businesses in the deal are expected to generate $1.7 billion of EBITDA in 2025, according to estimates gathered by Visible Alpha, implying a multiple of about 13 times. Fellow money manager Brookfield is seeking 20 times EBITDA for UK-based PD Ports, trade publication Infrastructure Investor reported. Similar transactions in Poland and California have notched more than 16 times.

The apparent discount might be the cost of geopolitically pressured M&A. Even so, if the deal is finalized, CK Hutchison stands to net $19 billion of cash while also negotiating détente. Its American Depositary Receipts jumped 17% following the news.

It also keeps Fink soldiering on with his shaky strategy. The logic behind absorbing GIP last year was that BlackRock’s status as the world’s largest asset manager, with extensive government and investing relationships around the world, would lead to infrastructure deals others couldn’t handle. CK’s ports should theoretically build on that bold promise by leveraging some of the GIP shipping expertise it acquired at a much richer price. In the new world order, some will secure tactical advantages. Others will be collateral damage.

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CONTEXT NEWS

Hong Kong-based conglomerate CK Hutchison said on March 4 that it had reached an agreement in principle to sell its interest in various ports, including along the Panama Canal, for about $23 billion including debt, to a group that includes BlackRock, Global Infrastructure Partners and Terminal Investment.

Under terms of the transaction, the consortium will acquire CK Hutchison’s 80% controlling interest in subsidiary Hutchison Port Holdings, which operates or is developing 43 ports across 23 countries. Ports run by unit HPH Trust in Hong Kong, Shenzhen and South China are excluded from the deal, as are other ports in China. The BlackRock group also will acquire HPH’s entire 90% interest in the Panama Ports Company, which operates ports in Balboa and Cristobal in Panama.

CK Hutchison Co-Managing Director Frank Sixt said in a statement that multiple bids were received, and that the transaction “is purely commercial in nature and wholly unrelated to recent political news.” The Trump administration has alleged, without evidence, that China controls the Panama Canal, and vowed to “take it back.”

(Editing by Jeffrey Goldfarb and Pranav Kiran)

((For previous columns by the author, Reuters customers can click on GUILFORD/ Jonathan.Guilford@thomsonreuters.com))