Failure to get CFIUS approval will put all of HNA investments in the U.S. in limbo.
As per a source familiar with the matter at hand, the U.S. government is unlikely to approve any investment by China’s HNA Group until the conglomerate’s ownership structure is ascertained.
Failure to get U.S. regulatory approval will have widespread repercussions for the Chinese conglomerate since its investment in U.S. hedge fund SkyBridge Capital LLC and Swiss trader and miner Glencore’s petroleum products storage and logistics business will be in limbo.
Both investments are currently awaiting U.S. regulatory approval.
HNA did not immediately respond to requests for comment.
Both, SkyBridge and Glencore declined to comment.
When faced with who its ultimate owners are, in 2017 HNA overhauled its shareholding structure and gave majority control to two charities. Undeterred by HNA’s obfuscation move regulators in New Zealand and in Switzerland are querying the conglomerate about the identity of its owners.
In January 2017, HNA had first disclosed its intention of acquiring a majority stake in SkyBridge, a hedge fund investment firm founded by Anthony Scaramucci, a former aide to U.S. President Donald Trump.
SkyBridge and HNA have never disclosed the terms of the investment.
Scaramucci declined to comment.
The investment has repeatedly faced delays in getting the green light despite it being a year, and faced intense scrutiny from the Committee on Foreign Investment in the United States (CFIUS).
As per a source, SkyBridge is downbeat about the prospect of the investment being completed.
In December 2017, Glencore, which agreed to sell a stake to HNA in March 2017 in its petroleum products storage and logistics business for $775 million, said it had partly closed the deal worth $579 million. The 3 assets that are located in the U.S. are awaiting CFIUS clearance and it expects that approval to be forthcoming by the end of June 2018.
Incidentally, Ness Technologies S.A.R.L., a U.S. software engineering company had agreed to be acquired by HNA for $325 million. But in December 2017 it sued HNA for failing to answer questions about its ownership in a CFIUS review. The deal has fallen apart.
In its lawsuit, Ness stated HNA and its unit had “covertly worked to evade and frustrate” CFIUS’s review of the investment by “discussing, planning, orchestrating and implementing various schemes to disguise the true nature of their organizations, corporate structures and ownership.”
Further, it stated that CFIUS could not even begin its formal review of the acquisition since it had “material questions about the completeness and accuracy of the information provided by HNA.”
HNA has said the lawsuit is baseless.
The stance taken by CFIUS has emboldened the Trump Administration to take a tough stance on China which is increasingly trying to acquire strategic U.S. assets to compete with it economically and militarily.