China's HNA to tap M&A brake after 50 billion dollars deal splurge
Chinese conglomerate HNA Group intends to slow the pace, or at least the size, of its acquisitions overseas after USD 50 billion deal splurge.
After two years of aggressive deal-making - from buying stakes in Deutsche Bank and Hilton Worldwide Holdings Inc to taking over electronics distributor Ingram Micro - Chinese conglomerate HNA Group intends to slow the pace, or at least the size, of its acquisitions overseas.
A sprawling aviation-to-financial services group, HNA has emerged as China's most active non-government player in global markets, with deals worth more than $50 billion (39 billion pounds) - equal to the annual GDP of Bulgaria.
Political uncertainty in the United States and Europe - such as the upcoming negotiations on Britain's departure from the European Union - and China's broad crackdown on capital flight from the country, have changed the climate for HNA's unbridled growth.
Tensions between China and the United States are the biggest risk, said Tan, who received an MBA from St. John's University in New York and studied at Harvard Business School.
For HNA, which has accumulated assets even as other Chinese companies find it more difficult to acquire overseas, any pivot in strategy may bring the group more into line with government policy aimed at reducing the amount of money leaving China. It would also give it more opportunity to digest and rationalize the assets it has bought using often complex bank borrowing and debt arrangements.
Tan spoke to Reuters at a time when HNA's financing and ownership structure has come under intense scrutiny.
In three years, the group has more than quadrupled its assets, to 1.2 trillion yuan (137 billion pounds) at the end of last year from 266 billion yuan at the end of 2013.
"The scope of their ambition, the speed of these acquisitions, the enormity of the credit resources at their disposal has put HNA in a different league, where the normal rules of business don't seem to apply," said William Kirby, a professor at Harvard Business School who has authored a case study on the group.
Fuelling HNA's expansion has been the ambition of its founding Chairman Chen Feng, at the cost of rising debt.
The group had around $89 billion in credit lines from domestic banks at the end of May. Separately, the group and its subsidiaries have issued more than $10 billion in outstanding onshore and offshore debt.
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