UPDATE: OIO reveals reasons for blocking UDC deal

China's HNA Group rejected as finance company buyer.

The Overseas Investment Office says it could not tell who really owns and controls China-based HNA Group, so could not verify HNA’s suitability to buy finance company UDC.

HNA agreed to buy UDC from ANZ Bank for $660 million in January but ANZ revealed today the deal was blocked by the OIO.

In a statement, the OIO said: “The OIO did not determine who the relevant overseas person was from the information provided about ownership and control interests. The OIO was therefore not satisfied that the test in section 18 of the Overseas Investment Act 2005 was met.”

Section 18 of the act deals with approval criteria for overseas investments in significant business assets, including that the buyer is of good character. They are:

 (a) the relevant overseas person has, or (if that person is not an individual) the individuals with control of the relevant overseas person collectively have, business experience and acumen relevant to that overseas investment;

(b) the relevant overseas person has demonstrated financial commitment to the overseas investment;

(c) the relevant overseas person is … of good character;

(d) the relevant overseas person is not … an individual of a kind referred to in section 15 or of the Immigration Act 2009 (which sections list certain persons not eligible for visas or entry permission under that Act).

The OIO said HNA subsidiary TIP-HNA New Zealand Holdings, the acquisition vehicle in the transaction, could apply to the High Court for a judicial review of its decision.

Responding to the decision, ratings agency Standard & Poor’s said its BBB rating on UDC would stay on negative creditwatch for the time being.

"We understand that the HNA Group is considering its next steps in this matter.  We expect to keep our ratings on UDC on creditwatch with negative implications until either the sale is successfully completed or [ANZ] ends the sale process with HNA Group.”

S&P said if the sale does not proceed it expected to affirm its BBB credit rating on UDC, “reflecting our assessment of the likely support from its parent ANZ.”

EARLIER: The sale of finance company UDC to debt-laden Chinese group HNA has been scotched by the Overseas Investment Office.

The reasons for the OIO’s decision will be released later today.

In a statement to the NZX, UDC’s owner ANZ Bank said unless HNA managed to overturn the OIO decision the sale would not proceed.

“We don’t know if HNA will attempt to overturn the decision,” said ANZ’s New Zealand chief executive David Hisco.

“If the sale does not proceed, we’ll assess our strategic options regarding the future of UDC. It’s a great business and there is no immediate requirement to do anything, particularly given the strength of ANZ’s capital position."

An emailed statement attributed to an HNA spokesperson said: “We are disappointed by the OIO’s decision and find it inconsistent with the views of other regulators around the world that have recently issued approvals to HNA and other Chinese investors. The current political environment in New Zealand relative to foreign investment will play a significant role in our determination of next steps.” 

ANZ announced the proposed sale of UDC to HNSA in January this year. The sale price of $660 million was 1.6 times UDC’s net assets.

HNA, a sprawling conglomerate built up by founder Chen Feng from a small regional airline in Hainan, has attracted increasing attention for its heavy debt load used to fund its acquisitions.

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