News Content

HNA reported to have pulled out of talks with HK's Value Partners

CHINESE conglomerate headquartered in Haikou, Hainan, HNA Group Co, which also owns an airline, has walked away from late-stage negotiations to buy a stake in Hong Kong fund house Value Partners Group Ltd, according to Bloomberg citing people with knowledge of the matter.

HNA pulled out of talks to buy a significant stake from Value Partners founders Cheah Cheng Hye and V-Nee Yeh just weeks before a final agreement was expected to be signed, according to one of the people. The Chinese conglomerate's termination of the negotiations wasn't related to difficulty obtaining financing, another person said, asking not to be identified because the information is private.

Value Partners, which has a market value of about US$1.9 billion, said in a filing last week that the two shareholders' discussions with an unnamed suitor were scrapped due to commercial considerations. The fund manager had indicated last month that a deal was close, saying the potential acquirer's advisers were finalising a funding confirmation that's required before an offer can be formally made. Negotiations on terms of a deal were being finalised and financing talks had reached an advanced stage, according to a filing from Value Partners on December 20.

HNA, which started as a regional airline on China's Hainan island, has spent more than $40 billion since the start of 2016 to buy logistics, hotel and technology assets around the globe. The debt-fuelled acquisition spree has strained HNA's finances and raised its funding costs.

"They may change their strategy from a diversified approach towards a more concentrated, more focused approach," said Oliver Rui, a finance and accounting professor at China Europe International Business School in Shanghai.

Private enterprises including HNA and Dalian Wanda Group Co are cancelling some of their deal negotiations or selling recently-acquired assets, according to Mr Rui. That will continue at least until the end of 2018, he said.

HNA has racked up more than $28 billion in short-term debt, and its interest expenses have surged above levels it can cover through earnings.

"The core of HNA's business produces strong cash flows and are strategic businesses," said Henry Tillman, founder of London-based advisory firm Grisons Peak LLP. "My read is that financial services are just not core to HNA. I suspect that they did not want to launch prior to the Party Congress, then decided again to try it after, only to be discouraged."