China’s HNA Group has agreed to take over gategroup Holding AG for CHF.1.4bn ($1.4bn) in what is said to be ‘a definitive transaction agreement’ whereby HNA will launch an all cash public tender offer for all publicly held registered shares of gategroup at a price of CHF53 per share.

 

The Board of Directors of gategroup confirmed today that it has unanimously resolved to support the public tender offer by HNA and to recommend the deal to gategroup’s shareholders.

 

Headquartered in Haikou in Hainan, China, the privately-owned HNA Group is involved in many business sectors both in and outside Mainland China, including aviation (Hainan Airlines), tourism, logistics, infrastructure, real estate, financial services and other business and HNA Tourism is one of the top 20 tourism groups in China.

 

 

HNA also operates Haikou Meilan International Airport where it has partnered with DFS Group for many years on Hainan Island. More broadly, HNA Aviation also operates nearly 320 aircraft on over 570 domestic and international routes connecting more than 190 cities.

 

The two companies say that ‘the addition of gategroup’ will make a good fit with HNA’s existing services portfolio and add a key building block to its global expansion by establishing an increased presence in aviation related industries and services sectors.

 

HNA SAYS IT IS ‘EXCITED’

Adam Tan, Vice Chairman and Chief Executive Officer of HNA, said: “We are excited of welcoming gategroup to the HNA family and look forward to jointly embarking on the next stage of gategroup’s development.

 

“Our offer delivers an attractive proposal for all of gategroup’s stakeholders, providing shareholders with an attractive premium in cash, offering management and employees good career opportunities in one of the world’s largest aviation groups and underpinning gategroup’s long-term development with a responsible industrial ownership structure.”

 

 

The HNA Group says that once the public tender offer is complete it will delist gategroup from the SIX Swiss Exchange and operate the company as an autonomous portfolio company.

 

‘SWISS CONNECTION’ WILL REMAIN

At the same time, it emphasises that HNA will remain committed to retaining gategroup’s headquarters in Switzerland and supporting its Gateway 2020 strategy ‘as a responsible industrial owner with a long-term investment horizon’.

 

Commenting, Andreas Schmid, Chairman of the Board of Directors for gategroup said: “The offer reflects the fair and adequate value and quality built by gategroup. It makes strategic sense that our company will become part of HNA, one of the leading providers of airport and aviation services worldwide.

 

 

“HNA has extensive expertise in the aviation industry and its strong footprint in Asia will help gategroup to expand significantly in this fast-growing region, where gategroup has strategic headroom.”

 

Xavier Rossinyol, gategroup CEO added: “Beyond our shareholders, this transaction is a great next step for all gategroup employees. A strong shareholder will give stability and continuity to the group’s new strategy.

 

THIS DEAL OPENS UP ASIA FOR GATEGROUP

“Also for our customers, partners and suppliers, the strength of HNA in the key areas of the industry and especially in Asia will help gategroup to further strengthen our global network, while keeping the highest industry standards. We will remain independently managed and headquartered in Switzerland.”

 

The public offer is subject to a minimum acceptance condition of 67% and the approval of all competent regulatory and merger control authorities, plus other ‘customary closing conditions’.

 

 

A summary of the material terms and conditions of the transaction agreement will form part of HNA’s offer prospectus, which is expected to be published on or about 11 May 2016. The main offer period is expected to commence on, or about 27 May 2016 and to end on, or about 23 June 2016.

 

This will be followed by the additional acceptance period expected to commence on, or about 30 June 2016 and to end on or about 13 July 2016.

 

INFLIGHT SERVICE WILL ALSO BOOST PROFITS

Gategroup said today that Credit Suisse is acting as its financial advisor and Homburger AG as its legal advisor, while UBS is acting as financial advisor to HNA and as offer manager in the context of the public tender. Bär & Karrer is acting as HNA’s legal advisor.

 

Gategroup announced its CHF130m ($126.5m) acquisition of Sweden’s Inflight Service Group back in December 2015 and this is also expected to boost profits. This added CHF250m-worth of sales turnover, which should materialise this year.

 

 

This will obviously be welcome considering gategroup made a CHF63.4m loss in 2015 compared with a CHF38.9m profit in 2014.

 

As exclusively reported last year, gategroup’s ‘Gateway 2020 Strategy’ unveiled to investors last September foresees its retail onboard share changing radically by 2020 from around 18% today to 50% – a huge move towards strengthening the retail side to balance with its food business.

 

Presuming it is all successfully concluded, the tie up with the HNA Group will doubtless accelerate this progress.

 

In addition to its airline interests, the HNA Airport Group also works with 13 airports under its management and in cooperation projects. These include Haikou Meilan International Airport, Sanya Phoenix International Airport, Qionghai Boao Airport, Yichang Sanxia Airport, Weifang Nanyuan Airport, Manzhouli Xijiao Airport, Anqing Tianzhushan Airport, Tangshan Sannvhe Airport and Songyuan Chaganhu Airport.