Why HNA is putting the brakes on deals

Company targeting fewer acquisitions as Chinese regulators try to get a handle on debt
July 14, 2017 02:20PM

From left: 245 Park Avenue, the Midtown Hilton at 1335 Sixth Avenue and HNA Group’s Chen Feng (Credit: Brookfield, Hilton, and Getty Images)

HNA Group, one of China’s biggest conglomerates and the new owner of the trophy office tower at 245 Park Avenue, has put a freeze on merger-and-acquisition deals as Chinese officials crack down on debt to curb overseas investments.

People familiar with HNA’s strategy told the Wall Street Journal that the company said it is putting M&A activity on hold for now. Another person familiar with the plans told the newspaper that the company is targeting fewer deals and holding fewer talks about potential acquisitions.

HNA is, however, still talking about investing in asset-management firms and financial institutions.

In June, the China Banking Regulatory commission started investigating five big Chinese international investors as it tried to control debt levels.

The companies included HNA along with Anbang Insurance Group, Fosun International and Dalian Wanda Group.

HNA is one of China’s biggest spenders, and made a big splash in New York City in March when it went into contract to buy 245 Park Avenue for $2.21 billion, as The Real Deal first reported. Last year, the company paid $6.5 billion to buy a 25 percent stake in Hilton Worldwide Holdings.

Outbound Chinese investments have fallen off sharply this year after Chinese regulators made a push last year to stem the flow of spending abroad. A recent report from Juwai predicted that Chinese investment in U.S. real estate will likely continue to fall in 2017.

So far this year, HNA has announced $5.66 billion worth of overseas deals. The company is now the largest shareholder in Deutsche Bank after borrowing $3 billion to buy a larger stake, and is trying to expand in the financial services sector.

Overseas spending by Chinese companies in sectors outside finance in the first half of the year dropped 45.8 percent year-over-year to $48.19 billion, according to Ministry of Commerce data cited by the state-run Xinhua News Agency. [WSJ]Rich Bockmann