April 11, 2016 / 11:35 AM / 4 years ago

China's HNA extends M&A spree with $1.5 billion bid for Swiss Gategroup

ZURICH/HONG KONG (Reuters) - Chinese aviation and shipping conglomerate HNA Group stepped up its global expansion by agreeing an all-cash deal to buy Swiss airline catering firm Gategroup Holdings GATE.S for $1.5 billion (1.05 billion pounds), a price some shareholders and analysts criticized as too low.

The logo of Swiss airline catering firm Gategroup Holdings is seen in front of an office building in Kloten, Switzerland April 7, 2016. REUTERS/Arnd Wiegmann

The deal marks the latest in a string of overseas acquisitions by privately owned HNA [HNAIRC.UL], which, under the stewardship of co-founder and chairman Chen Feng, has grown into a group with nearly $100 billion in assets.

The overseas deals include plans announced in February to buy U.S-listed electronics distributor Ingram Micro IM.N for $6 billion and the $2.5 billion purchase of Irish aircraft lessor Avolon Holdings Ltd last year.

HNA, which was founded in 1993 and now operates more than a dozen airlines including its flagship carrier Hainan Airlines Co Ltd (600221.SS), is offering 1.4 billion Swiss francs, or 53 Swiss francs per share, for all of Gategroup’s outstanding shares. The price is a 17 percent premium to the catering firm’s last traded price.

HNA’s bid sparked an 18 percent rally in Gategroup shares, but they failed to trade above the offer price and some shareholders said the offer undervalued the company.

“HNA’s offer is far too low. We said a year ago that the fair value for Gategroup shares is 100 francs,” hedge fund RBR Capital Advisors’ head Rudolf Bohli said in a statement on Monday..

Gategroup’s board has recommended the offer, the companies said in a joint statement. HNA plans to delist Gategroup from the Swiss stock exchange. Gategroup will remain headquartered in Switzerland under the leadership of the current management team.

This is the second deal that HNA has struck in Switzerland, after it acquired cargo handler Swissport International for 2.7 billion Swiss francs (1.9 billion pounds) last year.

HNA Group has grown into one of China’s biggest aviation, logistics and services conglomerates, controlling 11 companies listed on the mainland China and Hong Kong stock markets. It has interests spanning airlines and airports, aviation leasing, and hotels and tourism.

Spurred on by slowing economic growth at home, Chinese companies have been highly acquisitive this year, with announced deal values topping $87.5 billion so far, compared to a record $103 billion launched last year.

This year nearly half of all China outbound M&A in value terms has gone into Switzerland, thanks to state-owned China National Chemical Corp’s record $43 billion bid for seeds and pesticides maker Syngenta AG SYNN.S..

Gategroup has hired Credit Suisse (CSGN.S) as financial adviser and Homburger AG as legal adviser. UBS UBSN.S is acting as financial adviser to HNA and while Bär & Karrer is acting as its legal adviser.

Reporting by Joshua Franklin in ZURICH and Denny Thomas in HONG KONG; Additional reporting by Matthew Miller in BEIJING; Editing Edwina Gibbs and Muralikumar Anantharaman

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