HNA 'walks away from late-stage Value Partners talks'

HONG KONG • HNA Group walked away from late-stage negotiations to buy a stake in Hong Kong fund house Value Partners Group, people with knowledge of the matter said.

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 a source.

The Chinese conglomerate's termination of the negotiations was not related to difficulty obtaining financing, another source said, asking not to be identified because the information is private.

Value Partners, which has a market value of about US$1.9 billion (S$2.5 billion), said in a filing on Thursday that the two shareholders' discussions with an unnamed suitor were scrapped because of 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. Negotiations on terms and financing talks had reached an advanced stage, according to a Dec 20 filing from Value Partners.

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

"The core of HNA's business produces strong cash flows and are strategic businesses," said Mr Henry Tillman, founder of London-based advisory firm Grisons Peak. "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."

In October, China held its Communist Party Congress, a gathering that sets all major policies.

HNA has racked up more than US$28 billion in short-term debt, and its interest expenses have surged above levels it can cover through earnings. The firm has taken various measures to bolster confidence such as touting creditor support and announcing stock purchases by executives in a bid to assuage concerns about its finances.

Buying a stake in Value Partners would have added to financial industry investments by HNA that include a US$4 billion holding in Deutsche Bank, aircraft-leasing operations across the world and a 25 per cent interest in Old Mutual's US asset management arm.

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A version of this article appeared in the print edition of The Straits Times on January 06, 2018, with the headline 'HNA 'walks away from late-stage Value Partners talks''. Print Edition | Subscribe