The Overseas Investment Office (OIO) has rejected an application from Chinese conglomerate HNA Group to acquire ANZ subsidiary UDC Finance.
The rejection comes after ANZ announced in January it had agreed to sell plant, equipment and vehicle financier UDC to HNA for NZ$660 million, pending OIO approval.
In a statement attributed to Lisa Barrett, its deputy chief executive for policy and overseas investment, the OIO says it has declined the application because it "did not determine who the relevant overseas person was" based on the information provided about ownership and control interests.
"The OIO was therefore not satisfied that the test in section 18 of the Overseas Investment Act 2005 was met," Barrett says.
"The decision was delegated to the OIO as it involved significant business assets only. TIP-HNA New Zealand Holdings Limited is able to apply to the High Court for a judicial review of the Overseas Investment Office’s decision. Copies of decision documents will published on the OIO website early in the New Year," says Barrett.
HNA, which has been on a massive global debt-fuelled acquisition spree, has become the subject of intense speculation over its ownership, who actually controls it and the sustainability of its debt position. HNA had planned for its subsidiary TIP Trailer Services to oversee UDC if the deal went ahead.
In July HNA listed 15 individuals and entities as owners. The biggest shareholders are the international and domestic divisions of HNA's charity, the Hainan Cihang Charity Foundation, with 29.5% and 22.75%, respectively, giving a controlling stake of 52.25%.
The protracted nature of the attempted sale has seen ANZ become the primary source of funding for UDC after depositors collectively withdrew over $550 million from UDC over the past year. In the meantime ANZ has advanced a further $790 million to UDC, with the bank's ANZ's available credit facility to UDC increased to $2.7 billion.
In a statement ANZ NZ CEO David Hisco, also a former UDC CEO, says the bank doesn't know if HNA will appeal the OIO decision.
“If the sale does not proceed, we’ll assess our strategic options regarding the future of UDC. It’s a great business and there is no immediate requirement to do anything, particularly given the strength of ANZ’s capital position," Hisco says.
“UDC continues to be a highly profitable and strong business, with great staff and customers, and a growing loan portfolio across a range of industries."
And in a brief statement an HNA spokesperson says; "We are disappointed by the OIO’s decision and find it inconsistent with the views of other regulators around the world that have recently issued approvals to HNA and other Chinese investors. The current political environment in New Zealand relative to foreign investment will play a significant role in our determination of next steps."
S&P Global Ratings says UDC's BBB credit rating remains on creditwatch with negative implications, following the OIO announcement.
Here's ANZ's full statement.
ANZ Bank New Zealand has been informed that New Zealand’s Overseas Investment Office has declined HNA Group’s application to acquire UDC Finance.
ANZ Bank Group Executive and New Zealand CEO David Hisco said: “While the sale agreement between the parties remains in place, unless HNA successfully overturns the OIO decision, the sale will not proceed.
“We don’t know if HNA will attempt to overturn the decision.
“If the sale does not proceed, we’ll assess our strategic options regarding the future of UDC. It’s a great business and there is no immediate requirement to do anything, particularly given the strength of ANZ’s capital position.
“UDC continues to be a highly profitable and strong business, with great staff and customers, and a growing loan portfolio across a range of industries.
“UDC’s focus remains on its core business of financing vehicles and equipment for people and companies across New Zealand. So, it will be business as usual for our staff and customers.”
This OIO decision has no impact on the recently announced AU$1.5 billion on-market buy back of ANZ Banking Group shares. The UDC transaction proceeds are equivalent to 10 basis points of APRA Common Equity Tier 1 capital. If the transaction does not go ahead, ANZ’s full-year 2018 earnings will no longer be adjusted for the sale. The transaction summary detail was included in the ANZ Banking Group News Release of 11 January 2017.