Increasing Noise Over Mirae Asset's Acquisition of US Hotel... Ultimately Leading to Litigation

Mirae Asset - Zhong Anbang Insurance's 7 Trillion KRW US Luxury Hotel Acquisition Hits Snags
Anbang Insurance Files Lawsuit Against Mirae Asset in US Court "Enforce Contract"
Mirae Asset Prepares Counterlawsuit... "Zhong Anbang Insurance at Fault... No Issues in Financing"

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Noise is growing in the process of Mirae Asset Financial Group's acquisition of a $7 trillion-scale luxury hotel in the United States. As the completion date of the deal was delayed, the contracting party, China's Anbang Insurance, filed a lawsuit urging contract fulfillment. In response, Mirae Asset has decided to file a counter-lawsuit holding Anbang Insurance responsible for parts not fulfilled during the acquisition process.

According to Bloomberg on the 28th, China's Anbang Insurance filed a lawsuit the day before at the Delaware Court of Chancery against Mirae Asset Global Investments, demanding the completion of the hotel acquisition contract agreed upon last year.

Last September, Mirae Asset contracted to acquire 15 hotels and resorts in 9 major U.S. cities owned by Anbang Insurance. According to Bloomberg, the acquisition price was $5.8 billion (approximately 7 trillion 90 billion KRW), the largest scale in domestic financial companies' alternative investments. Included were the New York JW Marriott Essex House Hotel, Four Seasons Hotel in Jackson Hole, Wyoming, Westin St. Francis in San Francisco, and Loews Santa Monica Beach Hotel.

Mirae Asset has already paid about 700 billion KRW, 10% of the total, as a deposit. The total self-investment amount is 2.6 trillion KRW, with Mirae Asset Daewoo investing 1.8 trillion KRW, Mirae Asset Life 500 billion KRW, Mirae Asset Asset Management 190 billion KRW, and Mirae Asset Capital 100 billion KRW respectively. The remainder was planned to be financed through secured loans via local investment banks (IBs). However, due to COVID-19 causing liquidity tightening in the U.S. financial market and a sharp decline in travel demand, hotel values also dropped, making investor recruitment difficult. According to market research firm Smith Travel Research (STR), as of the 18th, the one-week U.S. luxury hotel room occupancy rate was 9.9%, sharply down from 73% during the same period last year.

Bloomberg reported, "Anbang Insurance understands that Mirae Asset has not secured favorable conditions for financing due to the impact of COVID-19," and "Mirae Asset requested more time from Anbang Insurance as raising funds through bond issuance was difficult." The original contract expiration date was known to be the 17th.

Mirae Asset is preparing a counter-lawsuit holding Anbang Insurance accountable for reasons attributable to them during the acquisition process. A Mirae Asset official said, "During mutual negotiations on transaction conditions due to the impact of COVID-19, Anbang Insurance caused reasons attributable to them, and we will take legal action regarding this," adding, "It is only an issue arising from mutual negotiations on transaction conditions, not a financing problem."

As noise arises in Mirae Asset's U.S. hotel acquisition, attention is drawn to what impact it might have on large-scale acquisitions underway domestically. The acquisition battle for Asiana Airlines by HDC Hyundai Development Company, in which Mirae Asset Daewoo is set to participate as a financial investor (FI), is a representative case. In the 2.5 trillion KRW deal, Mirae Asset Daewoo agreed with HDC Hyundai Development to invest 490 billion KRW on the condition of acquiring a 14.9% stake in Asiana Airlines. A Mirae Asset official explained, "The Asiana Airlines acquisition and the Anbang Insurance case are unrelated and have no impact."

There is also an interpretation that the sharp decline in hotel demand due to the COVID-19 crisis is rather fortunate for Mirae Asset. A financial investment industry official said, "If the deal had been completed before COVID-19 broke out, the hotel value would have plummeted, causing Mirae Asset huge losses, but since only the deposit has been paid so far, it is rather fortunate," adding, "There is now room to further reduce the final acquisition price."

This content was produced with the assistance of AI translation services.