HNA Acquired the 5th Container Lessor GE SEACO

Dec 20, 2011, 09:00 ET from HNA Group

BEIJING, Dec. 20, 2011 /PRNewswire-Asia/ -- On Dec, 20th, HNA Group held a press conference in Beijing to announce its completion of acquiring GE SEACO of GE, the 5th container lessor in the world, with 1.05 billion dollars.

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At 11:30pm, Dec 15th, HNA Group accomplished the 100% equity delivery with GE SEACO, which is one of the largest international acquisitions against the gloomy shipping industry. The acquisition is the biggest one in HNA's history, a giant step towards one of the world's leading container lessors. It is another major international acquisition in the international leasing market after it purchased the aviation leasing business of ALLCO Finance Group of Australia in 2010. This move is a milestone in HNA's internationalization strategy.

It is said that the management team of GE SEACO, including CEO David G. Amble, will remain with the company. As the world fifth container lessor, GE SEACO has and manages around one million TEU. Based in Singapore, it has rep-offices in over 80 countries and regions.

HNA indicates that the leasing company will operate as a core business within HNA's existing logistics and finance operations. To date, the leasing business of HNA Group covers infrastructure, aircrafts, ship and container, which will be future expanded.

The news is a strong response to the rumor that HNA has suffered defeats in its projects. How does HNA Group succeed the acquisition of GE SEACO against the gloomy background of the international shipping industry?

HNA is Widely Supported

Having been growing rapidly since China's adoption of the reform and opening up policy, HNA Group is an integrated operator in modern service industry with air travel, modern logistics and modern financial services as its three pillars, offering services in aviation, logistics, financial services, tourism, real estate, retailing and airport management etc. HNA Group owns several brands: Hainan Airlines, the first Skytrax Five Star Airline in mainland China, Deer Jet, the biggest business jet company in Asia recognized by the Argus Platinum Five Star, Bohai Leasing, the first public leasing company in China and Haikou Meilan Airport, the second Skytrax Four Star airport. The quality service has been highly praised by the society. By Dec, 2010, its asset had exceeded 200 billion yuan and revenue, 60 billion yuan, ranking 179th among China's Top 500 enterprises 2010.

Since the year 2006, HNA has accelerated its international expansion and take internationalization as a major part of its development. In 2006, it restructured CR Airways into Hong Kong Airlines. In 2007, it acquired three hotels in Belgian Capital Brussels. In 2008, after the breakout of the financial crisis, HNA saw opportunities in the depressed market. In 2010, it successfully acquired the high-quality aviation leasing business of ALLCO Finance Group, which has made the aviation leasing business of HNA one of the top 10 in the world and also helped HNA to expand its business and customer base in the world.

In 2010, HNA Group took part in the bidding for the Triton Container International Ltd. (one of the top 5 container lessors) with the intention to be involved in the container leasing industry. After several rounds of bidding, HNA Group was regarded as the most likely bidder. However, in the last round, HNA Group was out-bidded by a small margin.

The defeat of Triton didn't deter HNA but rather deepened its understanding of the container leasing market, embarked its interest and enabled it to see the broad prospect.

Before long, HNA learnt that the shareholders of GE SEACO (also one of the top 5 container lessors) wanted to sell the 100% equity. It immediately sent its letter of intent to Deutsche Bank, the financial consultant of the seller. In the following six months, the project team of HNA (including financial consultant, legal consultant, auditing and taxation consultant and industrial consultant etc.) completed a thorough due diligence research. Besides, the team also communicated with the management team of GE SEACO efficiently and discussed the development path after the acquisition. The homework had helped HNA Group have a clear understanding of the management and operation of GE SEACO.

The sound performance of GE SEACO and the prospect of the leasing market consolidated HNA's determination for the project. In early June, 2011, HNA won the bid with 1.05 billion dollars in the third round.

In the month after, the teams of the two parties negotiated the terms of the acquisition agreement and signed the agreement in Montreal, Canada on July 29th, 2011. According to the agreement, HNA shall pay 60 million dollars as a deposit within 4 month after the agreement was signed and finish the government approval and equity delivery before the end of Dec, 2011.

In line with China's "Go Global" policy, the acquisition is an achievement for Chinese enterprises to fight into international market. The agreement has been approved and supported by NDRC, Ministry of Commerce, Ministry of Foreign Affairs, Liaison Office of the Central People's Government in the Hong Kong Special Administrative Region, State Administration of Foreign Currencies and other regulators over international investment. The approval and registration have been completed.

Several big financial institutions and state-owned banks had shown their intention of financing for the project, but China Development Bank succeeded in becoming the only financing bank for the GE SEACO project.

The widely supported HNA Group successfully completed the delivery of the 100% equity of GE SEACO. The acquisition, the biggest in the history of HNA Group, is a manifestation of strength in practical operation, acquisition, multi-party coordination and international operation.

Confidence in the Future

The acquisition, a cooperation between two strong players, will help the two complement each other. This is an integration of world economy and the Eastern and Western cultures. It also demonstrates the two parties' confidence in the development of GE SEACO.

GE SEACO, a world leading lessor of container, was held by GE Capital of USA and SEACO of UK with 50% each. Based in Singapore, it has 21 branches, over 180 warehouses and 168 staff. By the end of 2010, GE SEACO has a total asset of 1.908 billion dollars, revenue of 355 million dollars and net profit of 97.6 million dollars. It has been making money for three years in a roll and the expected net profit for 2011 is over 100 million dollars.

It has and manages around a million TEU, including dry cargo container, reefer container, tank container and other special purpose containers, to meet the diversified demands of customers. The value of containers other than dry cargo ones accounts for 50%, a sound asset structure. The renting and retuning rates are also among the tops in the industry. After the financial crisis in 2008, the management team of GE SEACO cut the cost and managed to make profits for three years in a role against the gloomy shipping industry.

HNA Group says that in view of the sound performance of the management team and the communication during the due diligence research, after the acquisition, the management team and key staff will remain with the company and the original development path will be followed. More support will be given while the operation autonomy will be kept. It is expected that the operation scale and major indicators will be among the top three of the industry in the next three years. Now, HNA Group has renewed the contract with the CEO who will continue to lead the team to achieve better performance and accomplish the transition of management and operation.

"We are pleased to be a critical component in HNA's growth strategy for transportation and logistics," David G. Amble, CEO of GE SEACO says, "The company team is impressed by HNA's vision and determination. This deal is not only appealing to the buyer but also the management team and our customers. The company and the staff are thrilled at the thought of our growth in Asia and the world."

After the acquisition, HNA will learn from GE SEACO's business model, operation experience and management system to improve its management efficiency and international operation of its leasing business.

GE SEACO is expected to interact and coordinate with other leasing businesses of HNA to promote the group's general competitiveness.

HNA Group points out, "Although the American and European debt crisis may cause a double dip and sluggish growth in developed countries and the depressed international shipping market still takes time to recover, the growth of international trade continues, the demand for high value-added container such as reefer and tank containers are increasing and the production capacity of containers after the crisis is insufficient. All those factors indicate a strong growth and profitability of the container leasing market. "

The company's partners are confident about the development of HNA after the acquisition of GE SEACO. With its multi-industry synergy and resources combined with GE SEACO's sophisticated management system and experience, HNA believes that this deal will create sound synergy and set an example for the West and East cooperation as well as the internationalization of Chinese enterprises.