China’s HNA looks for logistics acquisition in Singapore

The wall of money exiting China has found an another target with HNA’s bid for the Singaporean logistics service provider CWT.

The Chinese company has offered S$1.399bn (US$1bn) for CWT Ltd, which is quoted on the Singapore stock exchange.

CWT Group is a diversified company with a presence in the warehousing of metals and coal, commodity trade financing, engineering maintenance, contract logistics and freight forwarding. CWT’s geographical footprint covers China, Europe, North America and South East Asia, however its logistics business is largely concentrated in Singapore and is the largest warehousing operator in the city-state. In results announced in February, its annual net income amounted to S$73.6m, with a profit margin of 3.5%, however its logistics business appears to have much stronger results and the company is investing heavily in new warehousing and ‘Logistics Mega-Hub’ capacity.

The aspiring purchaser, HNA Group, has been a remarkably aggressive buyer of companies over the past few years. Originally a medium-sized airline based in Hainan it has, according to Reuters, spent US$30bn on business ranging from hotels to aircraft leasing. It even attempted to buy a high-profile US hedge-fund.

It is unclear whether the offer for CWT marks a conscious move into logistics. HNA already owns a cold chain operation in China but not much else, however it does have exposure to commodity finance and inventory management. 

HNA has a complex holding structure, with a more than 60% ownership by the Chinese State. The vehicle that is designated as the acquiring company in the case of CWT is described as ‘HNA Belt and Road Investments’ and therefore it is possible that the purchase could be seen as an extension of China’s ‘Belt and Road’ infrastructure strategy. However, this is not clear.

Of course, the deal may not come off. China is very sensitive at present about the level of capital flowing out of its economy, led by companies who feel they cannot get a sufficient return for their investments internally. Beijing can and frequently does torpedo investment ideas it does not like, yet so far this has not stopped HNA.

Source: Transport Intelligence, April 11, 2017

Author: Thomas Cullen