Mergers & Acquisitions

HNA unit investing 2.8bn yuan in in-flight broadband supplier GEE

Beijing Shareco Technologies becomes single largest stakeholder in Global Eagle Entertainment, one of the biggest providers of satellite-based connectivity and media

PUBLISHED : Wednesday, 09 November, 2016, 2:43pm
UPDATED : Wednesday, 09 November, 2016, 3:29pm

Chinese conglomerate HNA Group is set to ratchet up its in-flight connectivity and entertainment operations, after subsidiary Beijing Shareco Technologies Co agreed to make an equity investment worth 2.8 billion yuan (HK$3.2 billion) in satellite-based communications provider Global Eagle Entertainment (GEE).

In a joint statement on Wednesday, Shareco and GEE said they also agreed to form a new joint venture in mainland China that would exclusively provide in-flight connectivity hardware and entertainment services on all HNA-owned airlines.

“Our investment and strategic alliance will accelerate adoption of in-flight connectivity, advertising and e-commerce in the Chinese market, and bring a differentiated experience to passengers,” Shareco chairman Jason Sun said.

“The transaction will also ... help GEE become the world’s largest in-flight entertainment and connectivity supplier.”

The global market for in-flight entertainment and connectivity hardware, services and content is forecast to reach US$9.82 billion by 2024 from an estimated US$3.13 billion last year, according to a report in May by Grand View Research.

Shareco, listed on the mainland’s National Equities Exchange and Quotations (NEEQ) market, said it plans to initially acquire newly issued common shares of GEE for US$103 million at US$11.00 per share, comprising a 9.9 per cent stake in the Los Angeles-based company.

Following the establishment of their joint venture, Shareco will then increase its total interest up to 34.9 per cent of GEE’s total outstanding shares, for a total consideration of US$416 million, through a combination of primary and secondary share purchases.

The HNA subsidiary would then become the largest-single shareholder in GEE and get seats on its board. This process is expected to be completed in the next three to six months, the two companies said.

The investments and the formation of their joint venture will be subject to, among other things, shareholder and regulatory approvals in both mainland China and the United States.

Dave Davis, the chief executive at GEE, said the joint venture with Shareco “would accelerate our growth and solidify GEE as a major in-flight entertainment and content provider in the rapidly growing Chinese market”.

The venture would serve as the exclusive provider of in-flight entertainment and connectivity services to all HNA-owned aircraft, a fleet that comprises more than 320 aircraft and is expected to grow to more than 500 aircraft in the future.

Their deal marks the first time a NEEQ-listed company has invested in a US public company, as well as represents the largest cross-border investment ever done by any NEEQ-listed company, according to Wind Information, the mainland’s largest financial data supplier.

Founded in 2012, Shareco provides e-commerce, online games and other content, as well as advertising solutions to about 10 airlines, including Hainan Airlines, Beijing Capital Airlines, Yangtze River Express, Tianjin Airlines and Okay Airways.

Shareco also collaborates with various Chinese internet firms, including Didi Chuxing and LeEco subsidiary LeSports, to co-develop in-flight products and services.

Privately held HNA, headquartered in the tropical southern province of Hainan, is among the most aggressive Chinese corporate investors overseas. It bought Swissport International, the world’s largest ground and air cargo services firm, from PAI Partners for US$2.81 billion last year.