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Chinese firm seeks to restructure $800 million deal for Alerian -sources

Tue 10th April, 2018 10:31pm
By Liz Hampton and Kane Wu
    HOUSTON/HONG KONG, April 10 (Reuters) - A Chinese investment
firm is attempting to restructure an $812 million deal for the
U.S. developer of the Alerian MLP Index  .AMZ , which tracks
publicly traded energy infrastructure companies, three people
familiar with the matter said in recent days, after missing two
deadlines to close the deal.  
    Hong Kong-based ZZ Capital International Ltd  8295.HK 
agreed last July to buy Alerian, a Dallas-based financial index
and data provider, for $582 million in cash and up to $230
million in additional payments if it hit revenue targets from
2018 to 2021.  urn:newsml:reuters.com:*:nL4N1K54G5
    ZZ Capital declined to comment. Alerian did not respond to
requests for comment on Tuesday and earlier declined to make its
chief executive available for comment on the status of the
    A collapse of the deal would demonstrate the difficulties
Chinese companies now face in financing and purchasing
high-profile U.S. assets. Chinese regulators last year began
pressuring domestic banks to rein in their overseas investments,
reducing capital for deals. 
    That clampdown has required ZZ Capital to seek "offshore
funding for existing deal pipeline" and slow new M&A proposals,
it said in a regulatory filing in February.   
    While small, Alerian has a significant role in promoting
infrastructure investments, especially in U.S. shale fields,
through its indexes and data on energy investments.
    Both parties were continuing to negotiate the deal, the
sources familiar with the matter said this week.
    The purchase originally was expected to close by December,
but ZZ Capital said in January it had won an extension to March
31 to fulfill undisclosed conditions. It has not publicly
commented since last month's deadline expired. 
    The U.S. Committee on Foreign Investment in the United
States, an intra-government agency that scrutinizes foreign
groups' purchases of U.S. assets to protect national security
interests, rejected the initial application for the Alerian
deal, one of the sources said on Tuesday.
    A Treasury Department spokesman for CFIUS declined to
comment, noting the agency is prohibited from disclosing
information filed with it.  
    Alerian is majority-owned by Gabriel and Daniel Hammond,
brothers who also own Broad Green Pictures, a Los Angeles film
and television production venture. Gabriel Hammond did not
respond to an emailed request for comment. 
    Alerian's indexes track energy master limited partnerships
(MLPs) and provide financial data on energy infrastructure
projects in the United States. Terms of the deal included a $25
million breakup fee to Alerian if the transaction was not
concluded by March 31.
    MLP investments have been hard-hit, first by the 2014
downturn in crude prices and more recently by regulatory and
taxation shifts. The Alerian MLP Index is down 13 percent this
year and major MLPs are restructuring from limited partnerships
to traditional corporations.  
    ZZ Capital also has had a number of executive departures,
including from its overseas investment department and
international deal execution team, one of the sources said last
    In February, ZZ Capital disclosed its chief executive
resigned and also released unaudited results for the nine months
ended Dec. 31 showing its after-tax profit had slipped to HK
$81.2 million ($10.3 million) from HK $95.4 million a year
    The company told Hong Kong regulators at the time that it
would "pursue cost cutting as well as short-term income
opportunities" in the quarter ending March 31.
 ($1 = 7.85 Hong Kong dollars)

 (Reporting by Liz Hampton in Houston and Kane Wu in Hong Kong
Writing by Gary McWilliams
Editing by Matthew Lewis)
 ((Gary.McWilliams@thomsonreuters.com; +1 713-210-8513))
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