Asian companies bought a record $128.3bn of US-based companies in 2016, up by about half from last year’s $66.6bn but more than a third of the increase was down to one conglomerate, China-based HNA Group’s unusual mix of acquisitions and venturing strategies.
Chinese companies invested $67bn of American mergers and acquisitions this year, compared to $11.9bn in 2015. Three of the four largest such deals this year were by HNA, according to news provider Forbes using Dealogic data.
This month, HNA closed its purchase of US technology distributor Ingram Micro for $6.3bn. It was the largest ever Chinese acquisition of a US company in this sector.
Last month, HNA agreed buy a 25% stake in Hilton Worldwide for $6.5bn from private equity firm Blackstone Group.
In October, HNA EcoTech, a subsidiary of Chinese global conglomerate HNA Group, said it had also agreed to acquire Beijing-based IT outsourcing services provider Pactera Technology International from Blackstone and other shareholders for an enterprise value of $930m.
Also in October, Avolon, a subsidiary of HNA Group, agreed to acquired New York bank CIT Group’s aircraft leasing business for $10bn. The deal, the largest in Forbes’s list, is scheduled to close early next year.
Earlier, in August, HNA’s subsidiary Hainan Airlines acquired a 24% stake in Brazil’s third largest airline, Azul, for $450m, becoming its largest single shareholder.
Founded in 1993 as an aviation transportation operator, HNA aspires to be a top 50 global company by 2030. Last year, HNA posted revenues of nearly RMB190bn ($28.6bn) but its future is being built on more than trying to double in size through acquisitions. Its approach to venturing is interesting and wide-ranging.
HNA Capital, another of the group’s subsidiaries and focused on the wide range of financial services, has already had its hand in venturing. In November, JBH Jubao Interconnection Technology, an online financial services spinout of China-based conglomerate HNA Group, raised $200m in a series A round led by private equity firm RRJ Capital, Asian Venture Capital Journal reported.
The round included financial services provider Henan Xinrongji Financial Holding and additional China-based investors whose identities remain undisclosed. JBH was formed by HNA in May 2014 and provides high-yield investment products to customers through an online platform.
In September, China-based travel-related financial services firm Yisheng Jinfu received RMB550m ($82m) in a series B round led by travel services provider HNA-Caissa Travel, China Money Network reported.
HNA-Caissa Travel will hold a 7.94% stake in the startup following the transaction. Yisheng Jinfu is a subsidiary of conglomerate HNA Group, while HNA-Caissa Travel is 31.8% owned by the conglomerate.
However, most interest internationally has been sparked by its indirect corporate venturing strategy.
In November, HNA and four other corporations, software provider Microsoft, industrial conglomerate General Electric, mobile semiconductor producer Qualcomm, and India-based conglomerate Tata & Sons, formed an investment consortium called Israel IoT Innovations – i3 Equity Partners with an initial $20m fund to back startups from Ramot, the tech transfer office of Tel Aviv University in Israel.
In early August, HNA provided $336m in funding for US-based technology campus and accelerator RocketSpace as part of a joint strategic venture agreement.
Founded in 2011, RocketSpace operates out of a San Francisco campus providing services such as programming, consulting, events and office space to high-growth startups which in the past have included Uber, Cheetah Mobile and Spotify. It does not take an equity stake in the startups.
RocketSpace also runs an open innovation consultancy that helps corporate clients like Schneider Electric, Converse, Tata Communications, Royal Bank of Scotland, Pfizer Consumer Healthcare, Samsung and ABinBev get access to disruptive trends and business models.
HNA’s investment will support RocketSpace’s ambitions to expand its activities into a worldwide network of campuses, which is scheduled to begin with the launch of a London branch in early 2017. Duncan Logan, CEO of RocketSpace, will be speaking at the Global Corporate Venturing and Innovation Summit in California on its expansion plans and partnership with HNA, which includes plans to open tech campuses across key cities in China.
At the time of the HNA deal, Logan said: “China is at the epicentre of today’s economy and it is critical for Silicon Valley to have a presence there. HNA is one of the world’s fastest growing companies and they are a powerful partner to have as we quickly scale across the globe.”
Eric Tong, chief executive of HNA EcoTech, HNA’s technology-focused subsidiary, added at the same time: “This deal is a critical piece of HNA’s investment strategy and RocketSpace will be an important partner for us in Silicon Valley, China and throughout the world.”
HNA’s strategy, therefore, in some ways parallels peers, such as Baidu, Alibaba and Tencent in using the full range of innovation strategies to globalize but the scale of expansion implies substantially deeper pockets and ambition to reach its stated growth goal.