Mergers & Acquisitions

Shareholders who vetoed HNA unit’s sale of Beijing office building to China Vanke want ‘better deal’

Shareholders may have blocked the deal in rare move because the US$190 million price tag was too low, even as the embattled firm fights to trim debt

PUBLISHED : Tuesday, 16 October, 2018, 1:46pm
UPDATED : Tuesday, 16 October, 2018, 11:25pm

Shareholders who rejected a plan by troubled HNA Group’s flagship airline to sell a Beijing office block as part of its efforts to reduce a mountain of debt said they are hoping for a better deal.

They voted overwhelmingly on Friday to pull the plug on Hainan Airlines Holding’s sale of the Beijing HNA Plaza for 1.299 billion yuan (US$190 million) to property giant China Vanke.

The shock result was the first time one of embattled HNA Group’s many recent fire sales has been blocked by shareholders.

“Shareholders think the sale is not the best plan. They hope the company can present a better plan that is in the best interests of the company and the shareholders,” the airline said in a filing on Tuesday, without further elaboration.

Hainan Airlines’ shares rose for the first time in five days on Tuesday morning, gaining by as much as 1.7 per cent in Shanghai to an intraday high of 1.83 yuan.

Shareholders vetoed the proposal to sell the 39,000 square metre building in Beijing’s bustling Sanyuanqiao area in a landslide 93 per cent vote at an extraordinary meeting last Friday. HNA had agreed to sell it to China Vanke on September 21, by selling its entire stake in the property unit whose sole asset is the office complex.

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The Vanke deal is among a flurry of asset sales that have been carried out by HNA Group at home and abroad as it tries to pay down debt that was standing at 541.6 billion yuan (US$79 billion) at the end of June, according to Bloomberg.

In August it offloaded the site of its original headquarters, Wang Hai Technology Plaza, in Haikou, to the developer Sunac China for 981 million yuan.

It also put nine overseas properties on the market in cities including London and New York.

The Vanke deal was the first time shareholders had spurned one of the sales.

“Such shareholder independence is not commonplace in China and would be new to HNA. What a rejection displays is that HNA may be losing its formerly firm grip on its rapid reorganisation,” said Brock Silvers, managing director of Kaiyuan Capital, a China-based investment advisory.

“Shareholders are undoubtedly aware of HNA’s balance sheet realities, and now HNA is aware that shareholders may be ready to add to the company’s financial complexities.”

One interpretation of the rejection is that the shareholders considered the selling price too low, even at a time the conglomerate is in financial difficulties.

The 1.299 billion yuan price tag works out as 33,200 yuan per square metre, lower than recent deals in the area.

China’s debt-laden HNA looks to sell more assets as pressure to repay debt weighs

Chinese developer Greenland Holdings in February 2015 bought a plot of land for office use there for 46,337 yuan per square metre.

In January, TPG Capital and its Chinese partner paid 36,500 yuan per square metre for a hotel in Sanyuanqiao. Hotels are generally cheaper than offices.

Details of the transaction were not disclosed so it is unclear whether Vanke is also prepared to pay the 443.7 million yuan liability of the HNA subsidiary that owns the building. But even with that included, the price is just 44,570 yuan per square metre.

“The market price of A-graded, brand-new offices in Sanyuanqiao area is around 80,000 yuan per square metre. The current sale price is indeed quite low,” said Zhang Ping, standing director of the International Federation of Finance and Real Estate.