UDC deal ‘dead and buried’
IPO a possibility with purchasers scarce — expert
ANZ Bank’s plan to sell New Zealand’s biggest finance company, UDC, to China’s HNA for $660 million looks to be “dead and buried” after the Overseas Investment Office (OIO) rejected HNA’s application, says a banking expert.
The OIO said it had rejected HNA’s application to buy UDC because of unanswered questions relating to HNA’s ownership.
David Tripe, senior lecturer in banking studies at Massey University, said a failed sale would be “untidy” for ANZ as it had already factored it into its last set of financial statements.
“I think it’s probably dead and buried because things are not getting any better and more transparent for them [HNA] and that’s not going to make things easy,” Tripe said.
“It raises the question as to what happens to UDC next, since much of its increased source of funding comes from ANZ itself, rather than externally, so one of the obvious possibilities is that it is absorbed into the bank,” he said.
Tripe said an initial public offer (IPO) for UDC was possible as it could be absorbed easily into the local sharemarket.
“I’m not sure that there are any other possible purchasers out there,” he said.
From a credit rating perspective, Tripe said a failed sale to HNA was probably better for UDC than a successful one.
Separately , S&P Global Ratings said that UDC would remain on “CreditWatch” with negative implications, following the OIO announcement.
“If the sale does not ultimately proceed, we expect to affirm our ‘BBB/A-2’ issuer credit rating on UDC,” it said.
In that scenario, S&P’s rating would reflect its assessment of the likely support from its parent company, ANZ.
Lisa Barrett, deputy chief executive policy and overseas investment, said the OIO did not determine who the relevant overseas person was from the information provided about ownership and control interests.
“The OIO was therefore not satisfied that the test in section 18 of the Overseas Investment Act 2005
It raises the question as to what happens to UDC next, since much of its increased source of funding comes from ANZ itself, rather than externally, so one of the obvious possibilities is that it is absorbed into the bank. David Tripe, senior lecturer in banking studies at Massey University
was met.”
HNA is able to apply to the High Court for a judicial review of the OIO’s decision.
In a statement issued through a public relations company, HNA said: “We are disappointed by the OIO’s decision and find it inconsistent with the views of other regulators around the world that have recently issued approvals to HNA and other Chinese investors.
“The current political environment in New Zealand relative to foreign investment will play a significant role in our determination of next steps.”
The potential sale of UDC Finance to HNA drew flak in the run-up to the last election and during coalition talks. In comments made while coalition talks were in progress, NZ First leader Winston Peters and now Deputy Prime Minister emerged as a critic of the deal. The OIO decision comes at a time when parliament is considering legislation which seeks to restrict the sale of existing residential property to foreign buyers and follows a tougher line on overseas investment by the new administration, which has seen new hurdles introduced for rural land sales to offshore buyers.
ANZ chief executive David Hisco said if the sale did not proceed, ANZ would assess its strategic options.
“It’s a great business and there is no immediate requirement to do anything, particularly given the strength of ANZ’s capital position,” he said.
He did not know if HNA would attempt to overturn the decision.
“UDC continues to be a highly profitable and strong business, with great staff and customers, and a growing loan portfolio across a range of industries,” he said.
This OIO decision has no impact on the recently announced A$1.5 billion on-market buyback of ANZ Banking Group shares.
HNA is China’s largest non-bank leasing company operating one of the world’s largest aviation finance businesses as well as one of the world’s largest container leasing businesses.
The conglomerate, dubbed by the Financial Times as China’s most acquisitive company, is trying to raise cash to pay off debt that helped fund more than US$40b ($57b) worth of purchases over the last three years.
US media this week reported that HNA is seeking to sell US$6b in overseas property.
HNA’s buying spree has seen it become the largest shareholder in companies such as Deutsche Bank and Hilton Worldwide Holdings.