China’s mysterious HNA Group owns assets of $218 billion, including about 20 per cent of Virgin Australia, and employs 410,000 people worldwide.
It is the biggest shareholder, with 10 per cent, in Deutsche Bank, the 15th largest bank in the world, and also the major owner, with 25 per cent, of Hilton Worldwide, and owns the Radisson hotel chain, and paid $8.2bn for technology distributor Ingram Micro.
But, extraordinarily for a corporation of its size and ambition, no one knows who actually owns HNA.
It developed rapidly into a global conglomerate spinning out of Hainan Airlines — explaining its initials — which is China’s fourth biggest airline, the only substantial privately owned airline in the country, and which it controls as a subsidiary.
It has shot up to 170th on the most recent Fortune 500 list of the world’s biggest corporations. Its overseas acquisitions are often financed through loans obtained offshore via the banks whom it has appointed as advisers, backed by the stakes it has bought.
The company itself believes it has already soared into the top 100.
Thus, although attracting frowns from the Chinese regulators tightening capital controls, it has until recently maintained a frenetic pace of foreign purchases, despite carrying at the start of this year debt of $130bn.
The mystery of its ownership has deepened despite — or because of — the recent explanation of its ownership structure by chief executive Adam Tan.
He revealed that 29.5 per cent is owned by New York-based Hainan Cihang Charity Foundation, and 22.75 per cent by China-based Hainan Province Cihang Foundation. These are themselves opaque bodies whose structures of ownership and accountability, and aims, guidelines and compliance patterns are at this stage unknown.
Tan, who owns 2.95 per cent of HNA, was pressed to provide information as the controversies swirling around the company were being amplified greatly in the Chinese speaking world by a series of explosive blogs by Guo Wengui, an exiled Chinese businessman now living in one of Manhattan’s most expensive apartments, overlooking Central Park, which he has on sale for $100 million.
A member of US President Donald Trump’s Mar-a-Lago resort club in Florida, he has captured millions of followers by his sensational revelations, starting several months ago, about the alleged corruption of Chinese senior politicians and business and media figures.
Guo claims HNA is secretly controlled by one of China’s top political families, but he has not yet fully divulged the evidence for this that he says he possesses.
Interpol — whose president is China’s deputy public security minister Meng Hongwei — issued in April a “red notice” seeking Guo’s arrest, but the US authorities have not responded.
The HNA share price plunged in April following an especially scandalous alleged revelation by Guo, and the company filed a defamation action against him in June.
The defamation suit says Guo claimed that “officials in China’s Communist Party and their relatives are undisclosed shareholders” in HNA, which he alleged had let senior state officials and their relatives use its planes — including its promotional Boeing 787 Dreamliner which has had a luxury fitout for $125m with marble-laminated bathrooms — “for purely personal reasons”. Last month, US regulators rejected a $500m bid by HNA for in-flight entertainment company Global Eagle, and HNA’s $227m purchase of recently sacked White House communications director Anthony Scaramucci’s 45 per cent of hedge fund investment house SkyBridge Capital is still being reviewed by US authorities.
In Australia, HNA bought for about $120m last year the 69ha Aitken Hill conference centre near Melbourne Airport, and six years ago bought for $117m the office tower at 1 York Street in central Sydney.
It is one of four large airline companies that own most of Virgin Australia. It paid $378m for its stake but has just one of 12 directors on the board.
HNA is determined to maintain its internationalisation, for instance insisting that all email traffic within the company on Fridays be written in English.
The US-based Hainan Cihang Charity Foundation, which owns HNA’s largest stake of nearly 30 per cent, worth about $23bn, obtained its shareholding according to Tan from the former major HNA owner Guan Jun, a mysterious Beijing businessman whose registered address is in a shabby apartment building in the capital.
Hong Kong-based businessman Bharat Bhise, the chief executive of Bravia Capital, had according to Tan temporarily held a major stake on behalf of Guan, who consolidated his shareholding this year and donated it to the Hainan Cihang Charity Foundation — in an apparently philanthropic gesture.
How the new New York charity and its Hainan-based cousin (the latter’s office is inside Hainan Airlines’ head office at Haikou on Hainan island) are managed, and plan to disburse their immense funds, remains unclear.
Their tax-free charitable status in both countries requires them to spend assets regularly on good works.
Hainan Province Cihang Charity Foundation was established in 2010, and gained its equity in 2013.
Chen Feng, HNA’s senior co-chairman and co-founder, owns 14.98 per cent of HNA, as does fellow co-founder and co-chairman Wang Jian. Both were senior government aviation officials before setting up the airline in 1993 on China’s subtropical southern island province of Hainan, substantially funded by the local government.
In all, executives with the company, including the chairman, now own the 47.54 per cent of HNA not owned by the two charities.
A company named Hainan Traffic Administration held 70 per cent, and Yangpu Jianyun Investment the other 30 per cent.
Hainan Traffic Administration was half owned by Tang Dynasty Development (Yangpu), which was 65 per cent owned by Hainan Province Cihang Foundation and 35 per cent by Tang Dynasty Development, which was 98 per cent owned by a Cayman Islands incorporated company, Pan-American Aviation Holding, and 2 per cent by Hainan Airlines, its own subsidiary.
A week ago, New York Attorney-General Eric Schneiderman, asked Hainan Cihang Charity Foundation for further information since it had not yet registered as a charity.
But lawyer Allen Wu, representing HNA and the charity in New York, told Bloomberg this was just a procedural matter since it first needed to receive its federal tax exemption as a charity.
He said: “HNA has a very healthy and very bright charitable purpose.”
The company has said that eventually the two foundations would own the whole of HNA, making it by far the biggest charitable venture in the world. And Chen says accelerating business success will drive it into the world’s top 10 conglomerates.
But HNA’s story indicates that, at least in structural terms, it tends not to take the most direct route, and that those on board may have to keep their safety belts buckled for a bumpy ride in the meantime, especially as more details of its unlikely and unique ownership structure start to spill out.
By ROWAN CALLICK