Indebted HNA Group assets attract interest from Fosun, JD.com

Shanghai

FOSUN Group and an arm of JD.com are among suitors considering investing in domestic operations of HNA Group as the indebted Chinese conglomerate is reorganised after being placed under government control, people with knowledge of the matter said.

Ping An Insurance Group, Juneyao Airlines and Air China have also been studying HNA's assets, the sources said, asking not to be identified because the information is private. Any deal could raise billions of dollars, they added.

The once high-flying conglomerate ploughed more than US$40 billion into a raft of trophy assets around the world before being reined in by the government, which started taking control just over a year ago as the pandemic hit HNA's remaining businesses.

The company still owns airlines, airports and retail assets in China. Some bidders could team up for an investment, and the structure of any potential transaction has not been finalised, the sources said.

Deliberations are ongoing, and there is no certainty the potential investors will proceed with concrete offers, the sources added. Representatives for Air China, HNA, Juneyao and Ping An Insurance declined to comment, while representatives for Fosun and JD did not immediately respond to requests for comment.

Billionaire Guo Guangchang's Fosun Group, founded in 1992, is a Chinese conglomerate with businesses spanning from pharmaceuticals and travel to retail and insurance. JD.com, one of China's biggest e-commerce platforms, has expanded into health care and logistics. JD Logistics has won Hong Kong stock exchange approval for an initial public offering that could raise about US$4 billion, Bloomberg News reported recently.

Juneyao Air, a privately owned airline based in Shanghai, said last Thursday that it plans to invest five billion yuan (S$1 billion) in a joint venture which will buy airline assets but it did not provide any details. Separately, Caixin reported that HNA Group's airlines assets are the target, citing an unidentified person.

Any disposal would come after HNA's creditors earlier this year applied for the group to be reorganised.

Founded as an airline in the 1990s by entrepreneur Chen Feng with seed money from George Soros, the company emerged from near obscurity to mount a buying binge that saw it become the top shareholder of Deutsche Bank and Hilton Worldwide Holdings. It was once the poster child for a cabal of Chinese empire builders that borrowed rapidly to snap up trophy assets around the globe.

The spree eventually took HNA's debt load to about US$86 billion by the end of 2017. It began shedding assets in early 2018 amid pressure from the government, which had started to crack down on the activities of its biggest offshore acquirers to rein in financial risk and damage to China's reputation. Last December, HNA agreed to sell Ingram Micro for about US$7.2 billion, its largest asset sale so far.

The Chinese government wants to return HNA to its roots as an airline and hence plans to dispose of HNA's non-aviation assets through a trust, Bloomberg News reported in January. The conglomerate started looking for strategic investors for Shenzhen-listed CCOOP Group, which operates convenience stores, department stores, logistics parks and online financial services, according to a March announcement on HNA's website.

Its airport assets and airline business are also seeking strategic investors, separate statements on the website show. HNA Infrastructure Investment Group, which develops real estate projects including airport industrial parks, and Hong Kong-listed Hainan Meilan International Airport are both owned by HNA. BLOOMBERG