Deal collapse takes a toll

Automotive Holdings shares hit skids due to HNA

SHARES in Automotive Holdings Group have slumped as much as 10 per cent after China’s debt-saddled HNA Group cancelled the $280 million purchase of the Australian firm’s refrigerated trucking arm.

HNA’s unsolicited offer landed last November, at the tail end of the firm’s $US50 billion two-year acquisition spree and just as concerns about its financing costs began to surface.

Automotive Holdings yesterday cited cashflow problems at the Chinese conglomerate Close Change among the reasons deal’s collapse.

The unwinding of the offer, which included HNA assuming an additional $120 million in debt on top of the purchase price, comes as those worries have intensified and as HNA has been offloading global assets to settle its debts.

“Unfortunately ... HNA has run into liquidity problems which, combined with the delayed FIRB (Foreign Investment for the Review Board) process, left the conditions precedent unable to be satisfied,” managing director John McConnell said in a statement.

Last week, AHG had said it was still in talks with HNA, including discussing an HNA request for funding support, but Mr McConnell yesterday said those talks had come to a conclusion.

AHG’s shares slumped to a six-year low, while the broader market rose.

“They still need to sell it and there’s no one like the Chinese to pay up for stuff, and it looks like they are off the market,” said Mathan Somasundaram, portfolio strategist at stockbroker Blue Ocean Equities.

Investors had hoped the proceeds would be reinvested in growth or returned to them via dividends or share buybacks, he added.

HNA, the owner of Hainan Airlines and the holder of a near 20 per cent stake in Virgin Australia, did not immediately respond to requests for comment.

The firm is unloading assets and shareholdings – having agreed to sell $US10 billion in real estate this year, along with stakes in Deutsche Bank and Hilton Worldwide Holdings Inc.

Capital control restrictions placed by Chinese regulators in recent years have also been weighing on HNA’s deal activity, and it has faced pushback in several countries due to concerns about its murky ownership structure.

Last year, it was blocked from buying a car-loan company in New Zealand, in part because the country’s foreign investment regulator was worried about the conglomerate’s financial stability.

Regulatory delays also scuppered its plans to buy a stake in US hedge fund Skybridge Capital LLC.

The Foreign Investment Review Board declined to comment on the Automotive Holdings deal.