Distributor’s debt-laden Chinese parent faces government takeover, putting future of subsidiaries into question
HNA Group, the China-based conglomerate that owns Ingram Micro, is facing a possible seizure by a provincial Chinese government as the potential for debt defaults loom. The takeover is raising new questions about Ingram’s future and ownership.
The Lowdown: HNA, which owns a collection of companies including airlines, banks, and hotel brands, is in debt to the tune of more than $86 billion. The government of the Chinese province Hainan is looking to take over the troubled company to prevent collapse from its debt-service pressure, according to reports by Bloomberg.
The Details: Chinese government officials and HNA representatives are mum on the details. Citing sources, Bloomberg says an announcement of HNA’s fate could come as early as Feb. 27, but Bloomberg cautions that takeover or bailout talks could last months.
The Impact: A Chinese government takeover — at the provincial or national level — would send shock waves through the HNA network of companies. Bloomberg indicates that the Hainan province would likely sell off HNA’s substantial airline assets to other Chinese carriers. The likelihood of other assets being sold off — including Ingram — is likely as foreign governments such as the United States would not want to see the Chinese government control over certain companies.
Last year, reports surfaced that HNA was in talks to sell Ingram Micro to Hong Kong-based RRJ Group, a private equity firm with substantial American and European backing. Many people felt RRJ gave Ingram an exit from HNA that would put it into the hands of ownership perceivably more suitable to Western regulators.
Background: HNA bought Ingram Micro in 2016 as part of a broad acquisition spree that contributed to its debt accumulation. The company has struggled to grow revenue and service its debt. Recently, HNA refocused its fiscal recovery efforts by placing more emphasis on its airlines. Unfortunately, the coronavirus outbreak’s impact on travel — particularly in China — has dampened those recovery efforts.