Shares in diversified automotive retail and logistics group Automotive Holdings Group Ltd (ASX: AHG) were down 10% after it announced that the previously proposed sale of the company's Refrigerated Logistics business to Chinese company HNA International has been terminated.
AHG Managing Director John McConnell said that the deal had to be terminated because of delays in the Foreign Investment Review Board (FIRB) process and also because HNA has run into "liquidity problems".
Mr McConnell also said that while he was disappointed with the outcome, at least it ended the prolonged discussions and now the Refrigerated Logistics management team can go back to fully focusing on running the business.
Liquidity problems
AHG first announced in November 2017 that it was selling its Refrigerated Logistics business to HNA International for an enterprise value of $400 million, of which $280 million would have been settled in cash.
The fact that this deal has now been terminated because HNA has run into liquidity problems should not be completely surprising.
When HNA proposed acquiring the New Zealand based UDC vehicle finance unit owned by Australia and New Zealand Banking Group (ASX: ANZ) for $600 million, investigations by the Australian Financial Review and New Zealand's Overseas Investment Office revealed in April that HNA had "well-known liquidity issues" and carried "heavy levels of debt".
What now?
For AHG, I think it's back to the drawing board as it aims to turn things around at the underperforming refrigerated logistics business. The company had initiated a restructuring program to improve operational efficiencies by investing in IT and consolidating operations to realise economies of scale.
The company will go back to focusing on that and reassess its options at a future date. A sale of this business unit in the future remains possible.
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