Mergers & Acquisitions

Fall from grace: China’s acquisitive conglomerates under a cloud axed from Fortune 500 list

PUBLISHED : Friday, 20 July, 2018, 6:56pm
UPDATED : Saturday, 21 July, 2018, 9:34pm

China’s four once-acquisitive conglomerates – Anbang Insurance Group, CEFC China Energy, HNA Group and Wanda Group – have been excluded from this year’s Fortune 500 list, taking another blow on top of piling debt and intense government scrutiny.

Fortune magazine, which compiles the list of the 500 largest companies in the world by revenue released on Thursday, said it axed the firms as “some of them have been under legal or regulatory investigations because of illicit operations and are having operational difficulties” even though their revenues were high enough to help them make the list.

Among the quartet, Anbang was included in the list for the first time last year at number 139, while CEFC climbed from 349 in 2014 to 222 last year. HNA rose from 464 in 2015 to 170 last year, and Wanda edged up from 385 in 2016 to 380 last year.

The conglomerates touted their inclusion among the ranks of the world’s greatest companies, as the Fortune 500 list is highly regarded in China.

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“HNA Group and Wanda Group are similar in that their excessive leveraged expansion and irrational offshore investments have led to financing difficulties,” Fortune said in an article on its Chinese-language website.

Anbang, CEFC and Wanda did not immediately respond to request for comments.

HNA Group was excluded because the company decided not to provide the financials required, according to a spokesman.

“Currently, we are focused on a strategic streamlining of HNA’s assets portfolio and improving the overall financial and operational performance of the group,” he said. “HNA has therefore chosen not to participate in this year’s Global Fortune 500 ranking.”

The four companies went on a shopping spree of flashy overseas assets from Manhattan’s landmark Waldorf Astoria luxury hotel to stakes in Russia’s top oil producer Rosneft starting from 2014.

The aggressive acquisitions eventually drew scrutiny from the Chinese government in late 2016, as it cracked down on debt-fuelled outbound investments amid intensifying capital outflow. The country’s foreign exchange stockpile lost about US$1 trillion from mid-2014 to early 2017.

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Pressured by the government, the debt-laden HNA Group has been looking to offload around US$13 billion worth of assets, including stakes in the world’s largest hotel operator Hilton Worldwide.

Wanda Group, the owner of US theatre chain AMC as well as Hollywood studio Legendary Entertainment, has also unwound assets ranging from stakes in Spanish soccer club Atletico Madrid to development projects in London and Australia.

CEFC and Anbang were less fortunate in getting away from the government’s direct intervention.

The Chinese insurance regulator took control of Anbang in February and detained its ex-chairman Wu Xiaohui, who later admitted fundraising fraud and embezzlement involving more than US$10 billion in April.

And Ye Jianming, the chairman of CEFC, China’s fourth-largest oil conglomerate, has been detained for questioning, the Post reported in March.

Fortune also excluded power producer China Guodian Corporation, which announced a merger with Shenhua Group in August 2017, Shanxi Coking Coal Group, New China Life Insurance and China General Technology Group.