HNA Group Co., the airline and hotel operator controlled by China’s Hainan province, is in exclusive talks to buy the shipping-container lessor co-owned by General Electric Co. (GE), a person with knowledge of the matter said.
HNA may reach a deal within a week if the lessor, known as GE SeaCo, opts to proceed with a sale, said the person, who spoke on condition of anonymity because the talks are private. The price under discussion values GE SeaCo at more than $1 billion, or about $2.5 billion including debt, the person said.
“The fundamentals for container leasing are pretty good right now,” Art Hatfield, a Morgan Keegan & Co. analyst in Memphis, Tennessee, said in a telephone interview. “Despite the fact that there’s too many ships out there, there’s a fairly tight container market.”
A successful bid for SeaCo, the world’s fifth-biggest container lessor, would be the latest demonstration of Chinese companies’ appetite for global acquisitions. Purchases in the past year include a $2 billion Norwegian chemicals operation and a General Motors Co. parts division.
HNA prevailed in an auction that also drew interest from Textainer Group Holdings Ltd. (TGH), the largest container lessor, and private-equity firm Kelso & Co., according to people with knowledge of those firms’ interest.
“As we stated previously, we continue to work through our strategic alternatives process, and really have nothing further to add,” said Dori Abel, a spokeswoman for the GE Capital unit at Fairfield, Connecticut-based GE.
Tong Fu, a spokesman for HNA Group, said he wasn’t aware of such a bid. Textainer Chief Financial Officer Ernest Furtado confirmed that the company is no longer involved in the bidding. George Matelich, a principal at Kelso, declined to comment about the SeaCo sale.
Led by Chairman Chen Feng, HNA began as the province’s regional airline and was once known as Hainan Airlines Co., its website says. It bought other carriers and is now China’s fourth-largest aviation company, the website says. HNA’s operations include airports, hotels and department stores.
In May, HNA agreed to buy a 432 million euro ($619 million) stake in a Spanish hotel chain. The company said this month it may bid for Hochtief AG (HOT)’s airport-operating unit, bringing it control of airports in Hamburg, Sydney, Budapest and Athens. It also agreed to invest in Turkish cargo carrier, ACT Airlines Inc.
GE Capital formed Barbados-based GE SeaCo as a 50-50 joint venture with Sea Containers Ltd. in 1998. Sea Containers, based in Hamilton, Bermuda, later filed for bankruptcy and emerged in 2009, with control of the company in the hands of former creditors.
Sea Containers’ successor, SeaCo Ltd. (SEAOF), confirmed in February that an investment bank was hired to review “strategic alternatives” for GE SeaCo. Deutsche Bank AG is the investment bank, and it is also working to assemble financing for HNA’s bid, one of the people with knowledge of the matter said.
With a fleet of 950,000 twenty-foot equivalent units, GE SeaCo is the world’s fifth-largest, according to a ranking included in a Textainer regulatory filing. Textainer, based in Bermuda and run from San Francisco, has 2.3 million TEU.
In May, another one of the top leasing companies changed hands when Chicago’s Pritzker family sold Triton Container International Ltd. to a pair of private-equity firms, Warburg Pincus LLC and Vestar Capital Partners. Bermuda-based Triton is the second-biggest container lessor, according to the Andrew Foxcroft ranking in the Textainer document.
Container lessors are benefiting from growing freight demand, limited supply and climbing prices for new units. The cost of a new-cargo box rose to a record this year, according to the World Shipping Council, a Washington-based trade group.
Higher prices are prompting shippers to lease rather than buy, said Brian Sondey, chief executive officer of lessor TAL International Group Inc. (TAL), on an April conference call. The Bloomberg U.S. Container Leasing Index, which includes shares of Textainer and TAL, returned almost 100 percent since the start of 2010.
The GE SeaCo stake is among finance assets grouped together to wind down or sell as CEO Jeffrey Immelt reshapes GE to focus on industrial units. He is shrinking the portion of total revenue from GE Capital as well as its assets.
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