China's HNA deal with Global Eagle collapses

Updated: 2017-07-27 00:29

Chinese conglomerate HNA Group Co and in-flight US services company Global Eagle Entertainment Inc have ended a deal that would have seen HNA purchase a $416 million stake in the Los Angeles-based company.

The pair terminated the deal because they couldn't get approval from the Committee on Foreign Investment (CFIUS) in the US before a deadline set in their original investment agreement, Global Eagle said in a securities filing late on Tuesday. CFIUS assesses inbound acquisitions for national security risks.

HNA unit Beijing Shareco Technologies Co Ltd agreed to buy up to 34.9 percent of Global Eagle in November, which would have made it the single largest shareholder of the provider of satellite-based connectivity and media to sectors including aviation, maritime and home entertainment.

In April, Global Eagle Chief Executive Jeffrey Leddy said CFIUS had found "unresolved national security" concerns and that a new application would explore "mitigation alternatives".

Neither Global Eagle nor CFIUS responded to email requests from Reuters for comment sent outside US business hours. Beijing Shareco didn't respond to Reuters' queries. HNA declined to comment.

HNA is also awaiting CFIUS approval for another deal. In January it agreed to buy hedge fund SkyBridge Capital LLC from the Trump administration's new communications director, Anthony Scaramucci.

Other Chinese deals awaiting CFIUS approval include Ant Financial's $1.2 billion purchase of MoneyGram International Inc and China Oceanwide Holdings Group Co Ltd's $2.7 billion acquisition of Genworth Financial Inc.

Chinese firms have announced 87 deals so far this year in the United States, a record high and up from 77 in the corresponding period of 2016.

The investment agreement with Global Eagle also involved establishing a Chinese joint venture providing Chinese airlines with in-flight entertainment and connectivity (IFEC) services, in which the HNA unit was to hold a controlling stake.

Global Eagle said in its Tuesday filing that with the main investment agreement canceled, "other related agreements" entered into with Beijing Shareco would also be terminated.

It said it continued to operate under existing agreements to provide IFEC equipment and services to HNA-affiliated carriers Hainan Airlines Holding Co Ltd, Beijing Capital Airlines Holding Co Ltd and Yangtze River Airlines Co Ltd.

"The company and HNA continue to discuss opportunities to expand their relationship in the Chinese market for IFEC equipment and services," Global Eagle said. There was no assurance such talks would result in any agreements, it said.


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