HNA’s $1.4 Billion Gategroup Offer Short in Initial Count

  • Gategroup shareholders tender 61.3% shares in initial period
  • HNA said in April deal contingent on getting at least 67%

HNA Group Co.’s plan to acquire the world’s second-biggest airline caterer in a 1.4 billion-franc ($1.4 billion) deal fell short of a target the Chinese conglomerate was seeking to garner in a preliminary count.

Only 61.3 percent of Gategroup Holding AG’s shareholders tendered their stock in the initial acceptance period that ended July 1, HNA said in a statement Monday. In April, HNA said the deal for the Kloten, Switzerland-based company required a 67 percent buy-in. The tally was preliminary and the final count will be published Thursday, HNA said.

The airlines-to-supermarkets conglomerate, based in the island of Hainan and controlled by Chinese billionaire Chen Feng, declined to comment further. Inflight caterers are struggling with a tougher operating environment as consolidation in Europe and the U.S. boosts carriers’ bargaining power, and a switch to low-cost flights means fewer passengers take meals.

The final results of the offer are due to be released Thursday. If HNA fails to secure the 67 percent sought, it can walk away from the deal or drop the condition and extend the offer period through July 21, said Dagmara Robinson, a spokeswoman for Gategroup, citing the deal’s prospectus.

“We believe the offering will go through,” said Pascal Furger, an analyst at Bank Vontobel AG in Zurich.

Unanimous Support

HNA intended to delist Gategroup upon completion of the public tender offer, according to its April statement. The Swiss company’s directors unanimously supported the offer, according to that statement.

The Chinese group offered Gategroup 53 francs a share plus a previously declared 30 centimes a share dividend. Shares of the Swiss company declined 1.7 percent to 51.20 francs on Monday, giving it a market valuation of 1.4 billion francs.

Gategroup had a loss of 63.4 million francs on sales of 3 billion francs last year, when the company said it would cut 300 jobs in locations such as Zurich and London.

The caterer’s 24.5 percent negative return on equity compared with a plus 10.1 percent at Hainan Airlines Co., HNA’s flagship carrier.

With airlines increasingly outsourcing non-core activities, some caterers are seeking to sell out. Air France-KLM Group said in May it’s in talks with HNA for sale of 49.99 percent of Servair and transfer of operational control for 475 million euros ($529 million).

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