Unit of Debt-Ridden HNA Buys China’s Dangdang

A unit of debt-ridden Chinese conglomerate HNA Group has finalized terms to acquire Dangdang Inc. in a deal that values the e-commerce company at 7.5 billion yuan ($1.2 billion).

Tianjin Tianhai Investment Co. Ltd., the Shanghai-listed subsidiary of HNA, will pay 3.44 billion yuan in cash and raise 4.06 billion yuan for the deal, the unit said in a regulatory filing Wednesday (link in Chinese).

After the acquisition, Dangdang Chairman Li Guoqing and his wife, Yu Yu, will own a combined 16.49% of Tianhai Investment.

The move comes after HNA revealed plans in March to take over Dangdang, a deal that was not directly confirmed by the e-commerce company at the time.

The deal has raised eyebrows in the market, as it comes at a time when HNA is grappling with its huge pile of debt after years of aggressive spending, including $50 billion of deals in aviation, tourism, real estate and other sectors.

HNA has slowed its acquisition pace since last year amid regulatory scrutiny over private companies’ overseas spending. Authorities are concerned about mounting debt risks and capital flight.

Tianhai, an investment arm of HNA, was in the international spotlight after buying Ingram Micro, a distributor of global information-technology products, for $6 billion in 2016. It was one of China’s largest high-tech purchases in the sensitive U.S. market.

Dangdang is one of China’s earliest e-commerce platforms, starting off in 1999 as an Amazon.com-like book retailer. But the company struggled to secure its market share amid fierce competition in China’s white-hot digital commerce market.

Dangdang went public on the New York Stock Exchange in 2010 but was later delisted, and has since attempted to expand into a wider range of e-commerce.

That effort has shown little success, with Dangdang stuck mainly in the niche online book market, a sector worth 45.9 billion yuan in 2017, compared to the 24 trillion yuan seen in the overall e-commerce market, which covers a wide range of goods that includes clothing, electronics, groceries and fresh foods.

Contact reporter Mo Yelin (yelinmo@caixin.com)