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OIO rejects HNA's $660 million UDC Finance purchase

Thursday 21st December 2017

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(Updates to add details of decision provided by the OIO throughout)

Dec. 21 (BusinessDesk) - The Overseas Investment Office has rejected HNA Group's application to buy ANZ Bank New Zealand-owned UDC Finance for $660 million over unanswered questions relating to the Chinese conglomerate's ownership

The agency, which sits in the Land Information New Zealand, declined the application because it couldn't determine who owned and controlled HNA and failed the legislative test, deputy chief executive policy and overseas investment Lisa Barrett said in a statement. The law requires the relevant foreign person wanting to invest in significant business assets has appropriate experience and acumen, a demonstrated financial commitment to the investment, is of good character and doesn't face entry restrictions to New Zealand.

"The OIO did not determine who the relevant overseas person was from the information provided about ownership and control interests," Barrett said. "TIP-HNA New Zealand Holdings Ltd is able to apply to the High Court for a judicial review of the Overseas Investment Office’s decision."

The decision was delegated to the OIO because it only involved business assets, and documents supporting the decision will be published early next year. 

Parliament is currently considering legislation which seeks to restrict the sale of existing residential property to foreign buyers and follows a tougher line on overseas investment by the new administration which has seen new hurdles introduced for rural land sales to offshore buyers. 

ANZ Bank New Zealand chief executive David Hisco said the country's biggest lender has been informed by the OIO of its ruling, and that the sale won't go ahead unless HNA can overturn the decision. 

"We don't know if HNA will attempt to overturn the decision," Hisco said in a statement. "If the sale does not proceed, we'll assess our strategic options regarding the future of UDC."

The UDC acquisition would have been the first New Zealand deal for Hainan, China-based HNA, which evolved from a regional airline to a global conglomerate with more than US$90 billion of assets. However, the company has been coming under increased scrutiny after a debt-fuelled US$40 billion global acquisition spree, and Standard & Poor's last month warned it would probably downgrade UDC's credit rating if the deal was approved due to HNA's "significant debt maturities over the next several years" which had led to "meaningfully higher" funding costs. 

“We are disappointed by the OIO’s decision and find it inconsistent with the views of other regulators around the world that have recently issued approvals to HNA and other Chinese investors," HNA said in a statement issued by an external PR agency. "The current political environment in New Zealand relative to foreign investment will play a significant role in our determination of next steps."

ANZ New Zealand's Hisco said the country's biggest lender isn't under any pressure to act hastily with UDC due to the bank's strong capital position, and that the finance company will continue to operate as normal. 

Parent Australia & New Zealand Banking Group's dual-listed shares slipped 0.9 percent to $31.76 on the NZX. 

(BusinessDesk)

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