ANZ scraps deal to sell UDC to China’s HNA

ANZ has walked away from potential $600m deal with HNA, amid New Zealand concerns over the China giant’s ownership.

HNA chief executive Adam Tan. The Chinese giant faces questions over its structure.

ANZ has chosen to walk away from a potential $600 million deal with one of China’s largest multinational corporations, after New Zealand’s foreign investment regulator raised concerns about the giant’s shadowy structure.

New Zealand’s Overseas Investment Office in late December said it would block ANZ’s attempt to sell its vehicle financing arm UDC Finance to China’s HNA Group, after the conglomerate — which has substantial investments in Australia — failed to give clear information about its ownership and control interests.

Although HNA Group had the option of appealing the NZ regulator’s decision, ANZ (ANZ) has now used a clause in its sale agreement, stipulating a contracted time frame for the deal to be completed, to walk away from the sale. The decision gives ANZ an opportunity to find a different buyer for the business.

“Following the termination of the agreement with HNA, we’ll continue to assess our strategic options regarding the future of UDC, although there is no immediate requirement to do anything,” ANZ New Zealand boss David Hisco said. “It will be business as usual for staff and customers,” he said.

The proposed sale of UDC Finance to TIP-HNA Holdings was announced just under a year ago.

But Lisa Barrett, the deputy chief executive of policy and overseas investment for the New Zealand regulator, in December said the Overseas Investment Office could not clear the takeover without sufficient knowledge of who controlled HNA Group.

The corporate structure of HNA has increasingly troubled regulators and investors. The company was founded in 1993 as a regional airline and has since grown into a $200 billion corporate giant after a slew of debt-fuelled takeovers.

HNA has rapidly built up major real estate holdings in global capitals, including New York and Sydney. It is the biggest shareholder, with 10 per cent, in Deutsche Bank, the 15th-largest bank in the world, and also the major owner, with 25 per cent, of Hilton Worldwide. It also has a cornerstone stake in Virgin Australia.

Although HNA chief executive Adam Tan recently explained the company’s ownership structure, the ultimate owners of the group remain uncertain. Just under 30 per cent of HNA is owned by New York-based Hainan Cihang Charity Foundation, and 22.75 per cent by China-based Hainan Province Cihang Foundation, both of which are opaque bodies whose structures of ownership and accountability, and aims, guidelines and compliance patterns, are unknown.

Although HNA Group has the ability to appeal against the decision in the NZ High Court, the blocking of the deal represents a stumbling block in ANZ’s ongoing asset fire sale.

The bank has struck deals to sell 16 business divisions over the past two years, including the recent $3.8bn sale of its life insurance, pensions and investments businesses.

HNA Group, which is based in Hainan in China, has been splurging cash on global takeovers in recent years, drawing scrutiny from regulators and Wall Street. But the conglomerate’s expansion has recently hit a wall. Between early 2015 and October, HNA had announced more than 80 deals totalling more than $US40bn. But now some US banks have scaled back dealings with HNA, citing its complex ownership structure. And HNA has faced higher borrowing costs in recent weeks.

Uncertainty surrounding HNA is compounded by the opacity of its ownership and corporate structure — a web of subsidiaries that makes it hard to figure out who controls what and who is ultimately liable if difficulties arise.

HNA last year built up a 19.2 per cent stake in Virgin Australia and this year received ACCC approval for a proposed strategic alliance with the Australian airline. It also last month bought a logistics division from Australian car dealer Automotive Holdings Group for $400m.

Additional reporting: Dow Jones Newswires