South America’s Richest Family Doubles Fortune on Shipping Bet Analysts Hated

(Bloomberg) —

The Luksic family, South America’s wealthiest with a combined fortune of about $25 billion, is reaping the benefits of a bet on global shipping and port logistics more than a decade after it first entered the industry.

An initial 2011 investment by its holding company Quinenco SA in Chilean shipping firm Compania Sud Americana de Vapores SA, or CSAV, was met with skepticism from analysts and investors after it initially posted steep losses. The family stepped in to put up more than half of a $1.2 billion capital raise in 2012, and executives had to negotiate waivers with banks and bondholders to spin off its tugboat fleet.

Quinenco progressively increased its stake in CSAV, which struck a deal in 2014 to merge its operations with Hamburg-based Hapag-Lloyd. CSAV now owns 30% of the world’s fifth-largest shipper, and the pandemic-fueled bonanza in the industry caused by clogged supply chains and surging freight rates has paid out handsomely.

“Some analysts described it as the worst investment in the group’s history,” Chairman Andronico Mariano Luksic Craig wrote in Quinenco’s 2022 annual report. “The first years were, in effect, quite hard. Successive capital increases and years of losses, as well as a decade without dividends, did not diminish our conviction that long-term results would be obtained. And so they were.”

In 2022, Hapag-Lloyd made nearly €17 billion ($18 billion) of profit on €34.5 billion of revenue. That led to a dividend of €63 per share, or €11 billion, approved at the annual general meeting in May. 

CSAV took in $5.6 billion of profit last year, mostly from its stake in the shipping giant. Quinenco’s portion of those earnings represented more than 90% of its net income in the period and 81% of dividends, the annual report shows. 

The Luksics’ holdings are complex — the family owns 83% of Quinenco, which in turn owns 66.5% of CSAV, which owns 30% of Hapag-Lloyd — but it’s clear the shipping bet has been fruitful. Since CSAV merged with Hapag-Lloyd in 2014, Quinenco has generated a 322% return, including dividends, compared with a 60% gain for Chile’s local stock index.

Family Fortune

The family, which also controls copper miner Antofagasta Plc., has seen its fortune nearly double in the past five years, according to the Bloomberg Billionaires Index, fueled in large part by the shipping windfall. 

They join other global shipping barons — from the Saades to Gianluigi Aponte — who benefited from expansion and high shipping rates during the pandemic. That wealth is now providing a cushion as rates fall from their highs and a glut of new ships rolls off production lines. 

This year, Quinenco-controlled SM SAAM SA, which has tugboat and air-cargo operations, closed the sale of about $1 billion of port assets to Hapag-Lloyd.

Quinenco was founded in 1957 by patriarch Andronico Luksic Abaroa as a manufacturer of wood props for underground tunnels. It has since diversified into finance, beverages, copper cables, fuel and logistics. 

It runs a joint venture with Citigroup Inc. to control Banco de Chile, and has a partnership with Heineken NV for its beer, wine and bottling business in Latin America under the company Cia Cervecerias Unidas SA. It also owns a nearly 30% stake in French energy firm Nexans SA and operates fuel stations in Chile, the US and Paraguay.

The Luksic family’s largest asset is its $12 billion stake in Antofagasta.

After Andronico died in 2005, his sons Andronico, Guillermo and Jean-Paul took over different parts of the business.

Today, Andronico, 69, is chairman of Quinenco and Jean-Paul, 59, is chairman of Antofagasta. Guillermo, who was actively involved in the businesses, died in 2013.

–With assistance from Jack Witzig.

© 2023 Bloomberg L.P.