HNA Close to Sale of IT Outsourcing Unit Pactera
China’s debt-ridden HNA Group is close to sealing a deal to sell its tech outsourcing arm Pactera Technology International Ltd. to a state-backed buyer as the conglomerate continues offloading assets for debt relief.
HNA Technology Group (HK) Co., a unit of HNA, is selling all of HNA EcoTech Panorama Cayman Co. to a Hong Kong-based unit of state-owned telecom equipment maker China Electronics Corp., according to a filing published on the website of the antitrust bureau of China’s State Administration for Market Regulation. HNA EcoTech Panorama is the parent of Pactera.
The deal was filed with the antitrust watchdog for quick review saying the transaction will not cause market concentration as the seller and buyer are not in relevant markets, according to the disclosure. No financial detail was disclosed in the filing.
HNA didn’t reply to questions from Caixin. But a staffer at Pactera confirmed the deal. HNA reached an agreement with China Electronics in October to sell the assets for around $500 million, the staffer said, speaking on condition of anonymity.
HNA bought Pactera in 2016 from Blackstone Group LP for about $675 million as the then high-flying aviation-to-finance conglomerate sought to expand its business reach into technology.
Pactera is one of China’s largest companies specializing in outsourced technology services for corporate clients, most notably financial institutions. It was formerly listed in New York and was privatized by private equity giant Blackstone in 2014 in a deal that valued it at $680 million.
HNA’s ambitious expansion hit a wall in the second half of 2017 as Beijing stepped up a crackdown on private companies’ debt-driven investments. HNA has since embarked on a series of asset sales to reduce its debt overhang, including most of its technology assets.
Since 2018, HNA has sold or agreed to dispose of more than 40 assets to pay down debt, according to Bloomberg. HNA’s chairman told media late last year that the company sold about $45 billion of assets in 2018.
But HNA is still under the pressure of a cash crunch. As of the end of June, HNA had interest-bearing liabilities totaling 550 billion yuan ($78.57 billion), according to the group’s financial report. HNA posted net losses of 3.5 billion yuan during the first half of 2019, with total debt of 706.7 billion yuan, of which short-term debt was 95.1 billion yuan.
HNA has posted Pactera on its list of assets for sale since 2018, drawing domestic and overseas bidders including Digital China, China UnionPay, Mahindra Group and Advent International.
Despite being China’s top supplier of information technology services to domestic financial institutions, Pactera is still losing money, even as it generates annual revenue in the $1 billion range, sources told Caixin.
Contact reporter Han Wei (firstname.lastname@example.org)
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