Mirae Asset, Will the Cancellation of the $7 Trillion US Hotel Acquisition Relieve Financial Burden?

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[Asia Economy Reporter Park Jihwan] Mirae Asset Global Investments has sent a contract termination notice to China's Anbang Insurance, abandoning the acquisition of 15 U.S. hotels worth 7 trillion won. Industry insiders predict that this contract cancellation will put a brake on Chairman Park Hyun-joo's global management activities at Mirae Asset.

However, some analysts argue that if the acquisition had proceeded amid the sharp decline in travel demand caused by the COVID-19 pandemic, it would have been difficult for the group to avoid a huge financial burden that could have shaken the entire group.

On the 4th, Mirae Asset Global Investments announced that it had sent a termination notice for the purchase contract of 15 U.S. hotels to China's Anbang Insurance. In September last year, Mirae Asset Group signed a contract to purchase 15 hotels owned by Anbang Insurance in the U.S. for $5.8 billion (7.1 trillion won) and paid a deposit of 700 billion won.

Some in the industry analyze that Mirae Asset's termination of the contract with Anbang Insurance might actually be a stroke of luck. Given the uncertainty about when the U.S. hotel industry will normalize due to COVID-19, a trillion-won hotel investment could have plunged the entire group into a liquidity crisis. Especially, if the transaction had been completed as initially planned, Mirae Asset would have had to bear the investment losses caused by the COVID-19 crisis alone. Of the acquisition amount reaching 7 trillion won, the amount Mirae Asset Group planned to invest as a beneficiary alone was about 2.4 trillion won.

Additionally, Mirae Asset Daewoo faced burdens due to insufficient capital capacity from acquisitions such as Asiana Airlines and the purchase of the Mazunga Tower in France. Mirae Asset bought the Mazunga Tower in Paris for over 1 trillion won but has yet to complete the sell-down to institutional investors. Since it also participated as a financial investor (FI) in HDC Hyundai Development Company's bid for Asiana Airlines, it needed to conserve its investment capacity as much as possible.

However, it remains uncertain when Mirae Asset will be able to recover the deposit of 700 billion won it paid. Even if the entire deposit is not lost, having a large amount of funds tied up for a considerable period is a significant burden.

An official from the financial investment industry explained, "Although 700 billion won of the deposit is tied up, from the perspective of the entire group, this situation could be an opportunity for Mirae Asset to minimize losses."

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