China’s HNA drops bid to buy Scaramucci’s SkyBridge on regulatory pushback

01 May, 2018 9:15 am

BEIJING (Reuters) – Chinese conglomerate HNA Group’s bid to buy a majority stake in SkyBridge Capital, a hedge fund investment firm founded by US President Donald Trump’s former aide Anthony Scaramucci, has been called off after facing regulatory resistance.

The deal had faced repeated delays in getting approval from the Committee on Foreign Investment in the United States (CFIUS), an intra-government agency that scrutinizes foreign purchases of US assets to protect national security interests.

HNA and SkyBridge said in a statement they found that it was not in their interests to pursue the transaction as significant time had passed since the deal was first announced and due to the “uncertain timing” of the approval process going forward.

SkyBridge and HNA Capital, a unit of the HNA Group, now plan to explore the development of a “mutually beneficial marketing and distribution arrangement” of SkyBridge’s offerings in China, the statement showed.

Scaramucci, who last year had a tumultuous 10-day stint as White House communications director, would be returning to the firm as co-managing partner to focus on strategic planning and marketing efforts, the statement showed.

HNA, the Chinese financial services-to-aviation conglomerate first announced in January 2017 that it was buying a majority stake in SkyBridge. HNA and SkyBridge have never disclosed the terms of the investment.

The US government has toughened its stance on the sale of companies to Chinese entities, at a time when Trump is trying to put pressure on China to be more accommodative on trade issues which he sees as uneven.

The CFIUS has also been tightening its scrutiny of Chinese companies’ acquisitions of American firms, and the HNA-SkyBridge deal becomes latest high-profile deal to be torpedoed under the administration of Trump.

In January, Chinese internet giant Ant Financial’s plan to acquire US money transfer company MoneyGram International Inc (MGI.O) collapsed after CFIUS rejected it over national security concerns.

SkyBridge and HNA said in the statement the US government panel had “offered a path to approval subject to certain mitigation”, although it was not clear what the mitigation measures were.

Two people familiar with the matter but who declined to be identified due to sensitivity of the subject, have said the deal could not close as CFIUS had declined to accept an application to review the transaction, which in effect prevented the official CFIUS review process from starting.


One of the people said CFIUS had refused to take the application because HNA kept changing the details of its ownership.

HNA did not immediately respond to a request for comment. A call to Scaramucci late Monday New York time was not answered.

Earlier this year, Reuters reported, citing a person familiar with the matter, that the US government would not approve any investment by HNA until the Chinese group provided adequate information on who its shareholders are.

The deal collapse comes as HNA continues with its drive to restructure operations and raise cash by selling some assets following a $50 billion acquisition spree over the past two years, which sparked scrutiny of its opaque ownership and use of leverage.

SkyBridge had about $10 billion in assets under management or advisement as of February. The firm’s investment offerings include commingled funds of hedge fund products, customised separate account portfolios and hedge fund advisory services.

SkyBridge will continue to be led by its current senior management team, the statement showed.

 

 




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