By Ira Breskin
The new principal owner of the Port of Montreal’s Gateway Terminals operation has no buyer’s remorse. “We definitely think we made a good deal,” says Alexandre Galarneau-Micone, an associate with Fiera Axium Infrastructure Canada II of Montreal, the syndicator. Fiera Axium of Montreal headed the consortium that earlier this year purchased the business run by MGT, Canada’s second biggest marine/container terminal, from Morgan Stanley Infrastructure Partners, for an undisclosed price. Published reports in March, when the deal closed, pegged the closing price at more than $500 million.
MGT operates two of Port of Montreal’s three box terminals. Company facilities handled about 800,000 containers in 2014, or more than half of total port throughput. Making the deal appealing and providing comfort to investors is the fact that “about 75 per cent of the cargo going through there (the port of Montreal) is captive, relative to other east coast ports,” Galarneau-Micone said earlier in May. He spoke at a Marine Terminal Finance and Investment Conference hosted in New York by Mercator International, a consulting firm based in Seattle. MGT’s business provides a solid revenue base, and opportunity to introduce value-added services, Galarneau-Micone added.
“MGT is an essential infrastructure asset for the local economy. It has a long-term lease, excellent management team and ability to generate cash flow,” Galarneau-Micone said. Seminal to closing the deal were lease concessions offered by Montreal Port Authority, the landlord, he said. As part of its deal, the new owners purchased MGT’s operating equipment and a 36-year operating lease concession, Galarneau-Micone said in a telephone interview. Also appealing is the fact that valuations for recent, similar port terminal deals have been higher than competing infrastructure investment options, he said. Moreover, this deal is noteworthy because it brought together an unusual, disparate collection of new, prime local buyers that have a long-term investment horizon. New owners, unlike the previous owner, a Morgan Stanley closed end $4 billion infrastructure fund, face no pressure to divest by specific deadline, according to Galarneau-Micone. MGT has been profitable since Morgan Stanley acquired its initial 80 per cent stake in February 2007; it purchased the remaining shares in December 2013.
In addition to Fiera Axium, an infrastructure portfolio management company, other investors include the Desjardins Group, the largest association of credit unions in North America, Manulife Insurance of Toronto, Fonds de solidarite FTQ, an investment fund run by Quebec’s largest central labor council, and Industrial Alliance. “The MGT transaction highlighted the competitive advantage of a local player. Clearly, we have a vested interest in the development of the local and national economy,” Galarneau-Micone said. Significantly, these investors weren’t discouraged by near record EBITBA-based sale price multiples attached to other recent marine terminal operation purchases, he said.
The port of Montreal, located about 1,600 kilometres inland on the St. Lawrence River, handles about 1.3 million TEUs per year. It is second in annual container volume in Canada only to Vancouver. Most major liners provide dedicated weekly or twice weekly service year-round to Montreal with post-Panamax ships carrying as many as 6,000 TEUs.