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HNA agrees to buy Swiss airline caterer Gategroup for $1.5 billion

04/11/2016| 8:24:45 AM| 中文

HNA makes all-cash offer for Swiss caterer at a 20% premium, after offer is accepted, Chinese conglomerate plans to delist Gategroup

Chinese conglomerate HNA Group agreed to buy Swiss airline catering company Gategroup Holding AG for 1.4 billion francs ($1.5 billion), as billionaire Chen Feng continues on an acquisition spree of aviation assets around the world.

The offer is about 20 percent more than the closing price Friday.

The acquisition builds on the airline and aviation assets the hotels-to-supermarkets conglomerate has made from Brazil to Switzerland. Private companies in China are starting to rival state-owned enterprises in heeding the government’s call to go global. Chinese buyers have announced plans to spend more than $77 billion this year through February, according to data compiled by Bloomberg.

However, the offer was rejected as insufficient by activist shareholders owning 11.3 per cent of Gategroup shares. Jonathan Herbert, chief investment officer at Cologny Advisors in London, predicted rival bidders would emerge.

The offer is contingent on shareholders’ agreeing to sell at least 67 percent of the company’s shares, as well as on regulator approval.

Catering Business

"Catering business can be very good if you have the volume," Um said. "The acquisition will help address the growing need for catering as more and more people travel by air. In the long run, HNA can bring in some of the know-how into China and help improve the service quality of its airlines."

Gategroup had a loss of 63.4 million francs in the year ended December, giving the company a 24.5 percent negative return on equity. Hainan Airlines, HNA Group’s flagship carrier, had a 10.1 percent return on common equity.

Last year, Gategroup said it will cut 300 jobs from places such as Zurich, London and Reston, near Washington, as losses widened. Some airline caterers have struggled in a new operating environment as airline consolidation boosts carriers’ bargaining power and a switch to low-cost flights on short-haul routes means a lower proportion of passengers take meals.

HNA Acquisitions

Upon completion of the public tender offer, HNA intends to delist Gategroup, according to HNA's Monday statement. The public offer is subject to a minimum acceptance level of 67 percent and regulatory approvals, according to the statement.

The Swiss company’s directors unanimously supported the offer, according to the statement. Credit Suisse Group AG acted as the financial adviser and Homburger AG as legal adviser to Gategroup, according to the statement. UBS Group AG is acting as financial adviser to HNA.

HNA and related companies have announced acquisitions and investments worth at least $19 billion since 2009, according to data compiled by Bloomberg. It bought Swissport International AG for 2.73 billion Swiss francs in July 2015, and was said to be among bidders for London City Airport earlier this year.

The latest deal would add to the Chinese group’s existing airline-catering business that now falls under its HNA-Caissa Travel Group Co. unit, said Cao Xuefeng, an analyst with Huaxi Securities in Chengdu, China.

“It will help HNA cover more ground in airline services, particularly after its Swissport acquisition last year, and expand their footprint globally,” Cao said.

Chinese conglomerates spent $101bn on outbound mergers and acquisitions in the first quarter of the year — almost as much as in the whole of 2015 — according to figures from Thomson Reuters. The overseas expansion has been driven by the limited options for domestic investment and a desire to gain global exposure.

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TAGS: HNA Group | investments | Gategroup
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