Automotive Holdings Group, Australia’s largest car dealer, has confirmed the worst kept secret in Australian business – that China’s HNA Group has pulled out of a $400 million deal to purchase AHG’s refrigerated logistics business.
Shares in AHG slid more than 10% to $2.54 at one stage before closing down more nearly 9% at $2.60.That’s a new six year closing low.
In a statement yesterday AHG said HNA failed to obtain Australian regulatory approval, but market analysts say that it has been clear for the past six months that HNA was under growing pressure from the Chinese government to either sell non-travel assets, or not proceed with their purchase.
HNA remains a shareholder in Virgin Australia for example.
AHG announced plans to sell the business to an HNA subsidiary for $280 million plus debt of $120 million last November.
"Unfortunately … HNA has run into liquidity problems which combined with the delayed FIRB (Foreign Investment Review Board) process left the conditions precedent unable to be satisfied within an agreed time frame,” AHG managing director John McConnell said in a statement.
HNA has been seeking to sell assets to raise cash and repay debt after overstretching itself through a debt-fuelled buying spree in 2016 and 2017.
Last week, AHG had said the deal would not be completed by the June 30 deadline as earlier advised as HNA had not yet secured foreign investment regulatory approval
Mr McConnell said he was disappointed with this outcome but said it ends an extended process of engagement with HNA and would allow the Refrigerated Logistics management team to focus fully on running the business.
"In early FY2017, AHG commenced a restructuring program aimed at improving the division’s operating efficiency through investment in information technology and integration of the four operating businesses to realise the benefits of scale. AHG was committed to completing that transformation program and did not initiate the sale process with HNA.
“HNA made an unsolicited offer for the Refrigerated Logistics division last year and we engaged with HNA. Unfortunately since that approach HNA has run into liquidity problems which combined with the delayed FIRB process left the conditions precedent unable to be satisfied within an agreed timeframe,” said Mr McConnell.
“It is a tribute to Stephen Cleary and his team that they have been able to continue to progress the transformation program while also dealing with HNA in relation to the proposed sale.”
“The intent was always to complete the investment phase of the transformation program and create optionality regarding the future for Refrigerated Logistics and we will maintain our focus on that,” said Mr McConnell.
Analysts doubt that a price of $280 million plus debt will be on offer from other buyers.
