ANZ agrees to sell UDC to major asset finance and leasing company HNA Group for $660m; UDC staff to keep their jobs and existing lending to be maintained

ANZ agrees to sell UDC to major asset finance and leasing company HNA Group for $660m; UDC staff to keep their jobs and existing lending to be maintained

ANZ has agreed to sell UDC Finance to HNA Group - a Chinese giant on a global acquisition spree - for NZ$660 million.

HNA has close ties with the provincial government of Hainan Island, and has announced at least US$34 billion of acquisitions in the past year, averaging more than two purchases a month, according to data compiled by Bloomberg in October.

It has evolved from a regional Chinese airline, founded in 1993, to a Fortune Global 500 company focused on tourism, logistics and financial services.

UDC Finance is New Zealand’s largest finance company that takes deposits.

ANZ New Zealand CEO David Hisco says the sale is in line with the bank’s strategy to simplify its business and focus on its core banking activities.

ANZ will make a net gain of A$100 million on the sale. The purchase price represents a price-to-book ratio of 1.6 times net assets of NZ$424 million (as at September 2016).

HNA intends to preserve UDC’s operations, so UDC employees will keep their jobs and existing customer lending will be maintained.

HNA doesn’t currently operate in New Zealand so ANZ says the sale will maintain competition in the asset finance and leasing market which is good for customers.

The UDC sale is subject to regulatory approvals and engagement with investors on the replacement of the Secured Investment program. It’s expected to be completed late in the second half of the year.

There’s been talk about a UDC sale for some time, with uncertainty around its ownership sparking Standard and Poor’s to downgrade its credit rating by three notches, to A-, in October.

Yet ANZ has been close book on the issue, even when an Australian Financial Review columnist in November reported HNA was in advanced discussions with ANZ over UDC.  

Hisco says the purchase of UDC Finance by one of the world’s largest asset finance and leasing companies is a significant vote of confidence in the New Zealand economy.

“HNA is well placed to invest in specialist asset finance products and systems which will help UDC expand further in the future.”

The giant has over US$90 billion of assets, US$30 billion in annual revenues and nearly 200,000 employees across North America, Europe and Asia.

The financial arm of HNA operates a diverse set of businesses in equipment leasing, insurance, and credit services, including China’s largest non-bank leasing company, one of the world's largest aviation finance businesses, one of the world’s largest container leasing businesses, and Europe’s largest trailer leasing business.

It has however been criticised for racking up large amounts of debt, as it has ramped up acquisitions of various companies around the world.  

“UDC’s highly diversified portfolio offers significant growth opportunities in Australasia and supports HNA Group’s disciplined approach to expand our core tourism, logistics and financial services businesses,” HNA Group vice chairman and CEO, Adam Tan, says.

Hisco says: “UDC Finance is a great business which is performing well.

“We’re extremely proud of what our teams have achieved over the years providing specialist asset-based finance to New Zealand businesses for plant, vehicles and equipment.”

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I hear there were Champaign corks popping on the terrace last night.

On the surface to pick up a significant and well perfoming asset at 1.6x book value looks like a reasonably good buy to me. Will be interesting to see where the proceeds from the sale are invested

straight back to the parent company to provide more capital for latest Apra requirements
any left over will be passed back to shareholders

Is the divestment in non-core entities a capital raising in disguise?

I think it's a great shame that UDC wasn't sold to Heartland Bank, who were very keen on buying it. That way all the profits that UDC makes would stay in NZ. It's just another NZ business that has been sold to China. I wonder if in the near future we will look back on these deals and wonder how we could have been so short sighted.

Heartland could not afford to buy it , quite simply we dont have enough discretionary Capital (savings) in NZ to enable us to do so .

Do you have any evidence for this statement?

Maybe the fact no NZ entity came up with a better bid.

I'm not sure that there was a bidding process. All I know is that the Chief Exec. of Heartland Bank expressed his strong interest in acquiring UDC. The whole sale process was undertaken by the ANZ HQ staff in Australia, with no involvement of ANZ in New Zealand. Perhaps ANZ sold it to HNA to prevent Heartland expanding and becoming a stronger competitor to ANZ in New Zealand.

It would have been a massive buy for heartland they have a market cap if 553 mil so would have had to do a huge capital raising to get a good chunk of the funds

So, UDC (ie the Communist Party of China in a mask) can now borrow freshly created Yuan at, say, -2% and swap for NZD which it lends out at, say, 14.5%? Not sure how the smoke and mirrors will work but it will not be to our advantage.

You are 100% correct

This is a disaster.

The Chinese are only able to do this because they are able to sell their products for hard currencies and pay their workers , internal suppliers , internal service providers , and rents with an untradeable , manipulated currency called Yuan .

The net effect is that they accumulate vast reserves of hard currency , which they battle to invest , hence the purchase of Bonds , property and whole large businesses

TRUMP needs to label them a currency manipulator and put tariffs on all chinese imports.

I am presuming HNA will have to set up their own network as they are no longer part of ANZ or could they snuggle up with an already registered Chinese Bank.