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HNA buying spree at risk as third deal in six months falters
[HONG KONG] New Zealand's rejection of HNA Group's proposed acquisition of Australia & New Zealand Banking Group's asset-finance business marks a third deal in six months the debt-strapped conglomerate has failed to complete.
The setbacks come as the China-based group has several major purchases pending, including agreements to buy a stakes in Anthony Scaramucci's SkyBridge Capital LLC hedge fund and the owner of one of Brazil's busiest airports. The company's Swissport Group unit is also awaiting approval to buy Aerocare, the biggest airport ground handler in Australia and New Zealand.
The pending deals are left over from a shopping binge amounting to tens of billions of dollars in recent years that has left the group with about US$28 billion in short-term debt. Interest expenses have surged above levels it can cover through earnings, while regulators from Germany to Switzerland and New Zealand have raised questions about the accuracy of the company's statements regarding its ownership.
For a primer on how regulators and investors view HNA, click here.
In July, the conglomerate's US$416 million purchase of a stake in Global Eagle Entertainment Inc. was blocked by regulators in the US, while HNA also failed to complete a US$325 million acquisition of a US technology company as the seller accused the Chinese group provided false and inconsistent information about its ownership to the Treasury's national security-review panel. HNA said such claims are baseless.
HNA last month agreed to a termination fee exceeding five per cent of the A$400 million (S$412.7 million) enterprise value for its planned acquisition of Automotive Holdings Group's business that transports refrigerated products, according to a person familiar with the matter. The higher-than-usual fee should the deal fall through may reflect rising concern about HNA's ability to complete deals. Australia's Takeovers Panel recommends termination fees to be about one per cent of a deal's equity value - which, unlike enterprise value, excludes assumed debt - for publicly listed targets.