• Jeff Matthews

If This Isn’t Racism, What is It?

The following paragraphs contrast the excellent Wall Street Journal reporting on the recent Dubai Ports World’s aborted effort to acquire certain U.S. ports with the also-recent acquisition of a toll road in Chicago by the Australian investment bank, Macquarie Bank.

I have not added, changed, or modified a single word.

Dubai Ports World’s offer to delay exerting corporate control over operations at five U.S. ports did little to calm the political firestorm in Congress as several key lawmakers dismissed the step and continued to demand that President Bush reopen a federal review of the deal.

—Wall Street Journal, 2/25/06 Last year, the city of Chicago was in a bind. It faced a $220 million budget deficit and its credit rating was under review for a possible downgrade. Voters feared a jump in property taxes.

Then help came from a surprising place: Australia. Macquarie Bank, Australia’s biggest homegrown investment bank, organized a deal to take over Chicago’s historic Skyway toll road under a 99-year lease for $1.8 billion — hundreds of millions of dollars more than some Chicago officials thought it would fetch.

—Wall Street Journal, 12/6/05

Officials at the government-owned Dubai management company said they plan to complete the $6.8 billion purchase next week of London-based Peninsular $ Oriental Steam Navigation Co, but to freeze all operations as they are at the five U.S. ports where P&O now manages terminals — New York/New Jersey, Baltimore, New Orleans, Miami and Philadelphia.

Australia’s emergence as Chicago’s white knight illustrates a surprising development in the world economy. On a given day, Macquarie Bank has a dozen bankers roaming the U.S. in search of deals.

But Sen. Charles Schumer (D., N.Y.), who has led the charge against the transaction, shot back that “the cooling off period isn’t going to work.” He and other Senate critics insisted that Congress needed more than just additional briefings by the White House and DP World officials, and should begin a full 45-day investigation of the security implications of the deal. In San Diego, one of its funds is building a 12-mile-long toll road. In Virginia, a Macquarie fund invested more than $600 million to take control of the Dulles Greenway, a 14-mile toll road outside of Washington. Macquarie operates the tunnel that connects Detroit to Windsor, Ontario, and just bought, with other investors, Icon Parking Systems, one of the biggest parking-lot operators in New York City.

In another sign that the uproar hasn’t subsided, Sen. Hillary Rodham Clinton, (D., N.Y.) plans to introduce legislation barring all foreigners from managing U.S. ports, despite the fact that the vast majority are now run by foreign companies and that U.S. companies are minor players in the industry. “We cannot cede sovereignty over critical infrastructure like our ports. This is a job that America has to do,” Ms. Clinton told a gathering in Miami.

Macquarie funds also hold stakes in the airports of Brussels, Copenhagen and Kilimanjaro, Tanzania. Macquarie funds own stakes in a major port in China, a Japanese turnpike and one of England’s biggest toll roads. This year, Macquarie said it was weighing a bid to buy the London Stock Exchange, though it is unclear whether that deal will be completed.

Mr. Chertoff [Homeland Security Secretary] denied that DP World was being held to different standards than other prospective foreign investors, but said that because the company was the first foreign terminal operator to be vetted by the secret Committee for Foreign Investment in the United States, the safeguards could serve as a template for future deals. “I would certainly anticipate that if another country had a company taking over a port [terminal] we would do the same thing,” he said.

Chicago is certainly glad the firm came knocking. Opened amid great fanfare in the late 1950s, the Skyway was supposed to be a critical leg in a stretch of toll roads extending to New York City. The Skyway turned into an epic white elephant. The toll road failed to generate enough traffic. In the 1970s, Chicago defaulted on its Skyway debt.

[DP World] said they played by long-established rules that control the government’s review of foreign investments. “We just complied with what was required,” said Ted Bilkey, DP World’s chief operating officer. Mr. Bilkey said the company began working last October to get the administration comfortable with the deal, and he personally met with senior officials in early December. “We felt we’ve done everything correctly, and all of a sudden there’s this furor,” he said.

Executives at Macquarie say U.S. drivers can expect to see more of them in the future. Says Nicholas Moore, the head of Macquarie’s investment-banking division: “It’s a firm bet that all of the roads that are being talked about in America, we’ll be looking at.”

If the political outcry against unfamiliar and dark-skinned foreigners from one side of the world owning ports in the United States, when contrasted with the red-carpet treatment given a more familiar brand of white-skinned foreigners from another side of the world, isn’t ignorance at best and racism at worst—then what is it?

Jeff Matthews I Am Not Making This Up © 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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The content contained in this blog represents only the opinions of Mr. Matthews. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. The content herein is intended solely for the entertainment of the reader, and the author.

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