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HNA Group Continues Overseas Acquisition Spree

By Huang Rong, Huang Kaixi, Coco Feng and Wu Xing

(Beijing)–Chinese conglomerate HNA Group is continuing its global buying spree with the planned purchase of a 51% stake in the oil products storage and logistics business of Glencore, the world’s largest commodities trading house.

The acquisition, which will cost $775 million and is being undertaken by HNA subsidiary HNA Innovation Finance Group Co. Ltd., is expected to be completed in the second half of the year, Glencore said on its website on Friday. A new company will be set up, HG Storage International Ltd., to run the business which operates in major trading hubs across Europe, Africa and the Americas.

The deal is the latest announced by Glencore, which has spent the last two years cutting its debt mountain by selling assets. For HNA, the agreement marks another mouthful in an acquisition binge that has seen the conglomerate snap up assets in a range of industries to diversify its portfolio.

HNA, a closely held group founded by Chairman Chen Feng, started life as an aviation company and owns Hainan Airlines, one of China’s top domestic passenger carriers. The group, which is based in Haikou, the capital of Hainan province in southern China, first made a splash in overseas acquisitions back in 2011 when it bought GE Seaco, the world’s fifth-largest container leasing company, for $1.05 billion.

Since then, it has expanded its footprint to industries as diverse as tourism, electronics, logistics, petroleum and finance. Last year alone, the group announced or completed more than $35 billion of deals, according to Caixin calculations, including the $6 billion acquisition of computer parts distributor Ingram Micro Inc. and the purchase of a 25% stake in hotel operator Hilton for $6.5 billion.

So far this year, HNA has announced at least 14 deals, including the purchase of a 3% holding in Deutsche Bank for an undisclosed price, the $474 million acquisition of New Zealand asset finance firm UDC Finance Ltd., and plans to take a stake in U.S. hedge fund SkyBridge Capital. It is also reportedly in talks to buy a controlling stake in Forbes Media, the publisher of Forbes magazine, from its Hong Kong owner, Integrated Whale Media Investments.

HNA Group now has six major business areas–aviation, tourism, logistics, industrial, financial services such as leasing, and technology. In May 2016, the aviation and tourism operations were merged, and the logistics and technology divisions were later brought together.

The total debt taken on by the group to fund its international acquisitions hasn’t been publicly disclosed by HNA, which joined the Fortune Global 500 list of the world’s largest companies in 2015.

The government’s heightened scrutiny of overseas investments and acquisitions as part of a tightening of controls on capital outflows may crimp HNA Group’s spending spree going forward. Data from the Ministry of Commerce show that outbound investment slumped by 52.8% in the first two months of 2017 from a year earlier to 92.4 billion yuan, after the authorities boosted their supervision.

The planned $2 billion acquisition of U.S. television manufacturer Visio by LeEco, a Chinese technology and online media group, appears to have stalled partly due to tighter currency controls

HNA appears undaunted, however. In the group’s annual report published on March 20, management said it will continue the focus on “merger and acquisition opportunities in developed economies,” especially in real estate, warehousing, bulk commodity trading, and logistics, while closely following potential opportunities in China’s “One Belt, One Road” initiative, as well as in Southeast Asia and other regions.

Contact reporter Coco Feng (renkefeng@caixin.com)

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