Shinhan Investment Corp. and other Korean institutional investors will chip in $350 million in total to finance part of the acquisition of Swiss airline catering company Gategroup by Chinese conglomerate HNA Group.
The investment marks the first overseas investment project for Shinhan Investment after it took responsible for Shinhan Financial Group’s global investment banking arm.
According to industry sources on Thursday, Shinhan Investment will dole out $200 million in M&A financing to HNA Group which acquired Gategroup last year.
Earlier, investment banking giant Credit Suisse funded half of the deal with $700 million. Shinhan decided to cover part of the finance in the form of senior debt. Besides Shinhan’s investment, Korean pension funds will participate in the deal by channeling $150 million to a fund to be raised by Lindeman Partners Asset Management.
The transaction is based on HNA’s 98 percent stake in Gategroup as collateral and the expected return on investment is more than 6 percent a year which is far above market average for its relatively short investment period of six months, according to sources.
An unnamed official familiar with the deal said "the financial transaction is backed by unlimited joint guarantee from some Fortune 500 companies under HNA Group led by the Hainan Provincial government. It is a very attractive investment opportunity despite HNA Group’s excessive business expansion pointed out by local media of late.
Gategroup, headquartered in Zurich, Switzerland, operates in 60 countries where 43,000 employees serve more than 300 airlines that fly some 500 million passengers. After the Gategroup deal, HNA acquired Air France’s in-flight catering unit Servair. The two in-flight catering firms posted a total of 310 billion won ($270 million) in EBITDA last year.
By Kang Doo-soon and Kim Dae-ghi
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