HNA Provided False Detail on Gategroup Bid, Says Swiss RegulatorBy
HNA failed to disclose ownership held by company executives
Swiss Takeover Board orders Ernst & Young examination
A Swiss regulator has ruled that HNA Group Co., the acquisitive Chinese conglomerate facing widening global scrutiny of its overseas purchases, provided some false information and failed to disclose that company executives held the biggest stake in its takeover of Zurich-based Gategroup Holding AG.
The Swiss Takeover Board found HNA provided incorrect shareholdings for the top two stakeholders -- Bharat Bhise and Guan Jun -- in the Gategroup offer prospectus last year. Bhise and Guan acted as trustees holding the shares for HNA co-chairmen Chen Feng and Wang Jian, Chief Executive Adam Tan and three other people, according to the board. The executives had failed to disclose their ownership in HNA, the board said in a newsletter published on Friday.
The regulator has asked Ernst & Young AG to look into whether the controlling group has complied with minimum price rules and best price regulations. It also will impose a fee of 50,000 Swiss francs ($51,000) on HNA and its unit HNA Aviation (Hong Kong) Air Catering Holding Co. for the proceeding.
A HNA spokesperson said the group cooperated fully with the Swiss board’s inquiry, and it respects its authority in this matter. According to a HNA Aviation release on Friday, the ruling does not affect the validity of the Gategroup takeover, which has been completed.
While the Hainan-based company released details of its shareholding structure in July, the group hasn’t disclosed who owns the charities that control HNA, or provided background details on Guan, about whom little is known.
Some Wall Street banks have shied away from HNA this year amid a lack of clarity on its sources of funding and ownership structure, people familiar with the matter have said. HNA, which has sued a fugitive Chinese businessman for defamation over allegations it’s secretly controlled by relatives of a powerful government official, has denied that its relationship with banks have soured.
HNA raised its stake in Deutsche Bank AG this year to become the largest single shareholder, with just under 10 percent of the stock as of May. More recently, HNA has received clearance from the Malaysian central bank for an indirect stake in Deutsche Bank’s subsidiary in the Southeast Asian country, according to people briefed on the matter.
In July, HNA said it reorganized its ownership and that two affiliated charities held a majority stake in the group. Other shareholders include Hainan Airlines Holding Co. and 12 HNA officials such as co-chairmen Chen and Wang. But the announcement didn’t explain how a little-known Chinese investor came to own 29 percent of a sprawling global conglomerate with more than $170 billion of assets, nor the circumstances behind Guan’s sale of his shares. People familiar with the matter have said Guan was holding the shares on behalf of HNA executives.
HNA’s ownership structure attracted the attention of the Swiss regulator, which in September asked HNA to explain why Chen and Wang were not listed as owners in the 2016 takeover prospectus for Gategroup, which provides airline transportation services.
The Swiss aren’t alone in questioning HNA, with the group also facing regulatory scrutiny from China and the U.S.
U.S. officials are examining HNA’s proposed purchase of Anthony Scaramucci’s SkyBridge Capital hedge fund. On Oct. 11, Chinese regulators banned HNA Group from engaging in some financial transactions with an insurance unit for six months, potentially drying up a source of funding for the debt-saddled conglomerate.