In Wake of Death at HNA, Chairman Chen Seen as Having to Step Up
For HNA Group Co. leader Chen Feng, the sudden death of his No. 2 raises the pressure for the Chinese tycoon to step up his involvement in fixing the finances of a group saddled with more than $90 billion in debt.
The late Wang Jian, the junior of HNA’s two chairmen, died while sightseeing in a French village this week at a time the group was undertaking an urgent restructuring that’s already involved more than $16 billion in asset sales this year. That leaves remaining managers, particularly Chen, to split the challenge of navigating one of China’s most indebted companies toward the path of normalcy.
“Chen Feng has been retiring himself from day-to-day management over the years and a lot of the responsibilities have been concentrated around Wang Jian,” said Yu Zhanfu, Beijing-based partner at Roland Berger Strategy Consultants. “Chen Feng is now crucial in helping stabilize sentiment in the company. He will also be the most important person to relay key messages to the outside world about HNA going forward and he needs to be more proactive.”
There is no shortage of challenges Chen, 65, and his managers including Chief Executive Officer Adam Tan, 51, face as they seek to overcome the group’s liquidity challenges. Below is a list of some of the biggest tasks looming.
After efforts by Hainan Province to establish a regional airline (Hainan Provincial Airlines) were not successful, Chen was tasked with bringing in private expertise and investment. Chen was able to raise 250 million yuan (US$31.25 million) in new capital, 75% from 24 institutional investors, 20% from existing corporate staff, and 5% from the Hainan government. In 1993, Chen launched the Hainan Airlines Company Limited China’s first joint-stock air-transport enterprise. Due to the 1997 Asian financial crisis – which caused the collapse of several local financial and real estate companies – the airline was recapitalized by the Hainan government and restructured and its name changed to Hainan Airlines (HNA) Company, Ltd. Hainan province was particularly affected by the crisis due to it being both a tourist and retirement destination that had seen a high amount of speculative development and lending. In 1995, George Soros invested $25 million in the airline for a 14.8% stake, becoming its largest shareholder.
In 2000, the Chinese national government forced the creation of three major domestic aviation companies: Air China Ltd., China Eastern Airlines Corp, and China Southern Airlines, which accelerated Chen’s plans for expansion. In 2000, Chen founded a holding company, the HNA Group Company, Ltd and used it as a vehicle to purchase Xi’an-based Chang’an Airlines in August 2000 and China Xinhua Airlines and Shanxi Airlines, both in 2001. In August 2001, Hainan Airlines merged with Haikou-based Meilan International Airport in Hainan province. Despite the mergers and acquisitions, Hainan Airlines remains the 4th player in China with 15% market share in 2012. In June 2006, Chen created another holding company, Grand China Airlines Holdings, to hold the airline assets of the HNA Group – then consisting of 100 planes and 30 billion yuan (US$3.75 billion) in assets, freeing the HNA Group to expand into other business lines. At the time, Chen owned 32.75% of Grand China Airline Holdings shares. In 2012, the HNA Group had sales of US$17.5 billion and pre-tax profits of US$837 million. The group structure of the HNA Group is known to be extremely complicated.
Thanks to ready access to bank financing and his extensive political connections, Chen was able to go on an acquisition spree – using his holding company, the HNA Group, as the primary purchasing vehicle – and expanded its operations into logistics, retail, property, tourism, and financial services. Commenting on future growth, Chen stated in 2014: “By 2020, we can become one of the top 100 companies, and by 2030, we want to be one of the top 50…Assets are still cheap in the U.S. and Europe, and we will continue to acquire them. We need a batch of world-class companies to emerge from China to help the country’s growth, and HNA will be one of those. We want to be everywhere.”
According to the HNA Group website, in 2015, the HNA Group included controlling stakes in 11 listed companies, revenues of RMB 190 billion ($25.6 billion USD), group assets of RMB 600 billion, and over 180,000 employees worldwide.
- In 2006, the HNA Group acquired two airlines in Hong Kong, Hong Kong Airlines and Hong Kong Express Airways.
- In 2011, the HNA Group paid US$260 million for a foreclosure-threatened Manhattan office tower at 1180 Sixth Avenue and purchased the Cassa Hotel New York for US$126 million.
- In May 2011, the HNA Group purchased a 20% interest in the NH Hotel Group for €431.6 million (US$610.7 million) and in November 2014, HNA increased its ownership to 29.5%.
- In August 2011, the HNA Group purchased GE Seaco via its Bohai Leasing affiliate for US$1.05 billion, the world’s 5th largest marine container leasing company.
- In October 2012, the HNA Group completed its acquisition of a 48 percent stake in Aigle Azur, France’s second largest airline, for €52 million.
- In June 2013, the HNA Group purchased TIP Trailer Services, Europe’s largest truck and trailer leasing company (with 45,000 units), from G.E. Capital.
- In January 2015, affiliate Bohai Leasing purchased the Bermuda-based container leasing group, Cronos Limited, for €2.18 billion.
- In June 2015, HNA purchased a 6.2% interest in the South African airline, Comair.
- In June 2015, HNA Group bought a 15 percent stake in Red Lion Hotels Corporation from Columbia Pacific Advisors.
- In July 2015, HNA Group purchased airport luggage handler Swissport International Ltd. from PAI Partners SAS for 2.73 billion Swiss francs (USD$2.8 billion).
- In November 2015, the HNA Group announced it would invest US$450 million in low cost carrier Azul Brazilian Airlines, becoming its single largest shareholder, with a 23.7% interest.
- In November 2015, HNA Group announced it would make a 10% investment in French hotelier Pierre & Vacances.
- In January 2016, the HNA Group via its Bohai Leasing affiliate, purchased Irish aircraft leasing company Avolon. When combined with HNA’s existing aircraft leasing business, the new entity with over 500 aircraft will become the world’s fourth largest aircraft leasing business by asset value.
- In February 2016, the HNA Group agreed to purchase technology distributor, Ingram Micro for $6.0 billion, via its controlled affiliate, Tianjin Tianhai Investment Co Ltd.
- In April 2016, the HNA Group purchased the London-based, ICE – International Currency Exchange.
- In April 2016, the HNA Group purchased US$38B in sales Minneapolis-based Carlson Hotels (owner of the Radisson brand) which included a majority interest in US$7 billion in sales Carlson Rezidor Hotel Group of Brussels.
- In April 2016, the HNA Group purchased Gategroup Holding AG, the 2nd largest airline-catering company in the world, for $1.5 billion.
- In May 2016, the HNA Group purchased 49.99% of Air France‘s catering and cleaning subsidiary, Servair, with the option to increase its stake to 80% if certain conditions are met. When combined with previously purchased Gategroup, HNA will own and operate the world’s largest airline catering company.
- In May 2016, the HNA Group purchased a 13% interest in Virgin Australia Airlines with the option to increase its stake to 20%.
- In May 2016, the HNA Group purchased a 7% interest in private consortium Atlantic Gateway, the owner of 50% of TAP Airlines, as well as convertible shares, which if exercised, would increase its stake in Atlantic to 40% and its indirect ownership of TAP to 20%.
- In July 2016, the HNA Group purchased an 80% stake in the Zurich-based aircraft maintenance organization SR Technics from Abu Dhabi’s state investment company Mubadala.
- In October 2016, the HNA Group announced that it would purchase 25 percent of Hilton Worldwide Holdings Inc. from the Blackstone Group LP for $6.5 billion.
- In February 2017, HNA Group’s HNA Capital arm purchased a 3.04% stake in Deutsche Bank. Their stake was soon after increased to 4.76% and then to 9.9% in May 2017, becoming their single largest shareholder.
- In March 2017, HNA Group announced that it would purchase an 82.5 per cent equity interest in Frankfurt–Hahn Airport, Frankfurt, Germany‘s second largest airport which is popular with budget carriers. This is the HNA Group’s first acquisition of a non-Chinese airport.
- In March 2017, HNA Property Group, an affiliate of HNA Group, announced that it would purchase 245 Park Avenue for $2.21 billion, one of the highest prices ever paid for a New York City skyscraper. HNA also announced that they would back Tishman Speyer in the construction of The Spiral, a $3.2 billion, Bjarke Ingels-designed, 65-story, 1,005-foot office tower in the Hudson Yards development in Manhattan.
- In March 2017, affiliates of the HNA Group purchased a 25 percent interest in Old Mutual‘s U.S. asset management business for US$446 million.
- In March 2017, affiliates of the HNA Group purchased an aggregate 400,000 square feet of land at the former site of the Kai Tak Airport in Hong Kong for USD$1.135 billion. HNA plans to develop the land into a “world-class integrated residential complex.”
- In April 2017, HNA Group affiliate, Avolon, completed the purchase of CIT Group‘s aircraft leasing business for US$10.38 billion making HNA the 3rd largest aircraft leasing company in the world with a fleet of 868 aircraft.
- In April 2017, HNA Group purchased a 16.8% stake in Swiss-based travel retailer Dufry.
- In April 2017, affiliates of the HNA Group purchased from Odebrecht its 60% share in a consortium that owns 51% of Rio de Janeiro–Galeão International Airport – Brazil’s second busiest airport – giving HNA a 31.6% ownership interest. The remaining shares are owned by Brazilian airport manager Empresa Brasileira de Infraestrutura Aeroportuária (Infraero) (49%) and Changi Airports International Pte Ltd (19.4%) of Singapore.
Chen Feng was born in June 1953 in Huozhou, Shanxi province and raised in Beijing, the son of middle-rank Communist Party officials. During the Cultural Revolution, Feng worked for the People’s Liberation Army Air Force in the Sichuan; after the revolution was over in 1979, Feng worked for the Civil Aviation Administration of China and the National Air Regulations Bureau in China. In 1984, he won a scholarship to study at the Lufthansa College of Air Transportation Management in Germany. In 1989, he took a job at the World Bank’s loan office in Haikou and in 1990, he went to work for the Aviation Business Assistant to Provincial Governor in Hainan province which had seen a surge in development as a tourist destination.
Chen Feng is a Buddhist, and a scholar of that faith, and does not drink or smoke.
Edited from Wikipedia