Fri, Dec 22, 2017 - Page 10 News List

New Zealand blocks HNA Group deal

ANOTHER SETBACK:Beijing is cracking down on overseas dealmakers. A higher-than-usual termination fee might reflect rising concern about HNA’s ability to close deals

Bloomberg

HNA Group Co’s (海航集團) acquisition of Australia & New Zealand (ANZ) Banking Group Ltd’s asset-finance business in New Zealand has been rejected by regulators because of its opaque ownership structure, another setback for the acquisitive Chinese conglomerate that has come under worldwide scrutiny.

The New Zealand Overseas Investment Office did not determine who the relevant overseas person was from the information provided about ownership and control interests, it said in a statement yesterday.

HNA in July said it was controlled by two charities based in New York and Hainan, while 12 company officials including founders Chen Feng (陳峰) and Wang Jian (王健) hold stakes.

While the sale agreement remains in place, the deal would not proceed unless HNA successfully appeals the regulator’s decision, ANZ New Zealand chief executive officer David Hisco said in a statement yesterday.

HNA was disappointed by the decision, it said, adding that the “current political environment in New Zealand” over foreign investment would play “a significant role” in its response.

New Zealand Prime Minister Jacinda Ardern’s administration is banning the sale of residential homes to foreigners, and has tightened rules around purchases of rural land.

While the new rules do not affect the sale of business assets, the nationalist New Zealand First Party, which is in coalition with Ardern’s Labour Party, has voiced its opposition to the UDC deal.

HNA, founded in 1993 as a regional airline, has come under scrutiny after a debt-fueled US$40 billion acquisition spree across six continents, putting it at the center of China’s crackdown on the nation’s most prolific overseas dealmakers.

HNA agreed to buy UDC, ANZ Bank’s New Zealand asset-finance unit, for about NZ$660 million (US$461.52 million) in January this year. Under CEO Shayne Elliott, Melbourne-based ANZ Bank is offloading unwanted assets, most recently selling its life insurance businesses to Zurich Insurance Group AG for A$2.85 billion (US$2.18 billion) last week.

When the UDC agreement was announced, ANZ said it would book a net gain of about A$100 million on the sale and its common equity Tier 1 ratio would improve by about 10 basis points.

The lender today said there is no immediate requirement to do anything about UDC given the strength of its capital position.

“UDC continues to be a highly profitable and strong business, with great staff and customers, and a growing loan portfolio across a range of industries,” ANZ Bank said.

In July, HNA’s US$416 million purchase of a stake in Global Eagle Entertainment Inc was blocked by regulators in the US, while the conglomerate also failed to complete a US$325 million acquisition of a US technology company as the seller accused the Chinese group of providing false and inconsistent information about its ownership to the US Treasury’s national security review panel.

HNA said such claims are baseless.

HNA last month agreed to a termination fee exceeding 5 percent of the A$400 million enterprise value for its planned acquisition of Automotive Holdings Group Ltd’s business that transports refrigerated products, a person familiar with the matter said.

The higher-than-usual fee should the deal fall through might reflect rising concern about HNA’s ability to complete deals.

Australia’s Takeovers Panel recommends termination fees that are about 1 percent of a deal’s equity value — which, unlike enterprise value, excludes assumed debt — for publicly listed targets.

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