Goldman Sachs has stopped raising funds for Chinese conglomerate HNA Group’s IT outsourcing unit, shelving a planned US initial public offering (IPO), due to concerns over due diligence, insiders familiar with the decision have disclosed.
The Wall St bank began to run due diligence – or, to use the bank’s parlance, “know-your-customer” – checks last month when they found that the deal did not meet their internal criteria.
HNA bought Beijing-based Pactera from Blackstone last year for US$675m in cash and renamed it HNA Ecotech Panorama Cayman Co this year.
‘Not HNA’s first problem with a bank’
HNA has had problems with banks previously, with a leaked email from Asia head of Bank of America Merrill Lynch, Matthew Koder, this summer advising colleagues that the bank would not be working with HNA in the future due to concerns over corporate governance and company structure.
In its report on the development, the Financial Times pointed to suspicion in the west over HNA’s “opaque ownership” and a clampdown by Beijing on China’s dealmaking culture that saw HNA acquire a stake in Hilton Worldwide and a hedge fund owned by former White House communications director Anthony Scaramucci.
While Goldman Sachs has not been formally tasked with carrying out the IPO, it had been “tapped”, said Reuters, to seek pre-IPO funding.
HNA sought to play down the significance of the news, telling Reuters “HNA and Goldman Sachs have always had a strong working relationship, and currently all joint projects between the two companies are functioning normally”.
Pactera did not respond to requests for a statement, while Goldman Sachs declined to comment.