China's Fosun Drops Deal While Nursing Debt Hangover

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 [e-mail]

(END) Dow Jones Newswires

February 17, 2016 08:15 ET (13:15 GMT)

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