Brookfield abandons sale of UK ports group wanted by Boris Johnson ally

Brookfield Asset Management has called off the sale of a UK ports company that is locked in a legal battle with one of Boris Johnson’s closest allies, the Conservative Tees Valley mayor Ben Houchen.

PD Ports, which runs Teesport in north-east England, will remain in Brookfield’s hands after a lengthy sale process collapsed.

The South Tees Development Corporation, which Houchen chairs, had been bidding to take control of PD Ports after Brookfield put it up for sale. For Houchen, the site was an important part of a plan for a government-backed freeport designed to regenerate the local area.

Brookfield has been running an auction for PD Ports for several months, drawing interest from Peel Ports and Macquarie, as well as Houchen’s STDC, which had lined up Northumberland Estates and the Pension Insurance Corporation as potential backers.

“PD Ports is a great business that has performed very well under Brookfield’s ownership and continues to have exceptional long-term growth prospects,” a Brookfield spokesperson said. “The recent process has strengthened our conviction in the business, and we have made the decision to remain invested in PD Ports rather than sell the asset.”

STDC has separately sued PD Ports in a bid to prevent it from using two of three access routes into Teesport, though the main one is unaffected. In May, PD Ports accused the corporation of using the lawsuit “to extract a ransom discount” so it could buy the company more cheaply. The corporation denies this.

Brookfield had hoped PD Ports would fetch as much as £2bn. But a person familiar with STDC’s bid told the Financial Times last month that offers of between £1.1bn and £1.4bn were “more realistic”.

Buying PD Ports for more than £1.5bn would risk turning it into a “millstone” around the company’s neck, according to a person familiar with Peel Port’s strategy.

The trading performance of PD Ports has deteriorated during the sale process, two people familiar with the matter said.

Houchen’s election as Conservative mayor made him a key figure in the party’s plans to win support in Labour’s heartlands in the north of England. People familiar with his thinking said last month that his regeneration plans would be slower and more expensive if he could not buy PD Ports.

A spokesman for Houchen declined to comment directly on Brookfield’s decision to end the sale, but denied it would damage the mayor’s hopes for a freeport — part of his plan to regenerate much of Teesside.

Since Brexit, Johnson has pushed freeports as low-tax areas considered to be outside the UK for customs purposes, meaning that goods or components can come in tariff-free, although they may incur duties when exported.

With additional reporting by Jim Pickard in London