China's Fosun Drops Deal While Nursing Debt Hangover
February 17 2016 - 8:30AM
Dow Jones News
Chinese conglomerate Fosun International Ltd. on Wednesday
dropped its plan to acquire control of an Israeli insurer after a
global buying spree, including deals for resort operator Club Mé
diterrané e SA and a stake in avant-garde circus troupe Cirque du
Soleil, left it overleveraged.
Fosun had agreed in June to buy 52% of Phoenix Holdings from
Delek Group Ltd. for $461 million. The scuttling of the deal comes
as Fosun plans to reduce its $15 billion debt load after its
billionaire founder and chairman briefly disappeared late last
year, leading to concerns about its ability to refinance its
borrowings. Fosun said in December that Chairman Guo Guangchang was
" assisting in certain investigations" by Chinese authorities.
The abandonment of the purchase of Phoenix follows Fosun's
withdrawal in December of a takeover bid for BHF Kleinwort Benson
Group, a European merchant lender focused on private banking and
asset management.
"In light of the recent changes in global markets, we have
decided to terminate [the Phoenix] acquisition to focus on looking
for more suitable investment opportunities," Mr. Guo said Wednesday
in an emailed statement.
Shanghai-based Fosun has been one of China's most acquisitive
companies in recent years, announcing overseas deals last year that
were valued at more than $5 billion. Fosun paid $1.1 billion for
Paris-based Club Med in 2015 after a prolonged battle for the
company. It joined TPG Capital in buying Canada-based Cirque du
Soleil for $1.5 billion last year. In addition, Fosun has snapped
up a number of other global insurance and property assets,
including the former One Chase Manhattan Plaza in New York for $725
million.
Fosun has other pending acquisitions abroad. It is teaming up
with China Minsheng Banking Corp. and others to buy Quam Ltd., a
Hong Kong financial company. The conglomerate is also part of a
buyout group planning to privatize U.S.-listed Chinese film
production company Bona Film Group Ltd. Last year, Fosun said it
would buy German private bank Hauck & Aufhaeuser Privatbankiers
KGaA and Belgium's financial-services group RHJ International
SA.
Fosun said Wednesday in a statement that it was putting greater
emphasis on strengthening the group's financial structure and
reducing its debt level, which should help lower its cost of
funding.
The company's debt has increased rapidly since 2014 when it
embarked on its acquisition spree, drawing increased scrutiny from
credit-rating firms. Moody's Investors Service lowered its outlook
on Fosun's Ba3 rating to negative in December, citing uncertainty
caused by Mr. Guo's involvement in the Chinese government
investigation. Moody's said the probe raised concerns about the
company's high level of short-term debt.
"Slowing acquisitions helps preserve Fosun's financial profile,"
said Kai Hu, an analyst at Moody's, adding that the rating firm
would continue to monitor the company's credit profile.
Write to Wei Gu at wei.gu@wsj.com
(END) Dow Jones Newswires
February 17, 2016 08:15 ET (13:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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