Chinese Luxury-Hotel Owner Accused of Hiding Ownership Disputes

(Bloomberg) -- China’s Dajia Insurance Group sought to conceal ownership disputes involving 15 luxury hotels it was selling to Mirae Asset Global Investments Co. in hopes of ramming the deal through before they came to light, Mirae said in a court filing.

Korea-based Mirae said Wednesday it canceled the $5.8 billion acquisition after learning Dajia couldn’t hand over legally valid titles to the properties and insurers refused to vouch for the Chinese company’s ownership.

Dajia hoped to close the deal before existing lawsuits over the titles “came to light, and before the Covid-19 pandemic took hold and ravaged the United States and the company’s business,” Mirae’s lawyers said in a countersuit filed in Delaware Chancery Court. Officials of Beijing-based Dajia weren’t available for comment.

The buyout is among almost 20 transactions that have fallen apart over the last two months as part of the Covid-19 pandemic, spurring court filings as valuations cratered on government-enacted lockdowns and as business operations ground to a halt. Nine virus-related deal challenges -- including the Dajia-Mirae battle -- are now before Delaware judges.

Dajia gained the portfolio through its predecessor’s acquisition of Strategic Hotels & Resorts Inc. Among the properties involved are the Westin St. Francis in San Francisco, Loews Santa Monica Beach Hotel, JW Marriott Essex House in New York and the Four Seasons in Jackson Hole, Wyoming.

Read more on the dispute here

The Chinese insurance conglomerate sued Mirae in the Chancery Court late last month, arguing that the South Korean asset manager is trying to “wriggle out” of buying the hotels.

Daija claims it was excused from keeping hotels open during the pandemic “because others in the industry are conducting hotel operations similarly.” But the deal’s terms are “absolute and unequivocal,” and any “attempt to rewrite the agreement should be rejected,” it said.

Dajia officials also said they alerted Mirae when they uncovered fraudulent titles to six California-based hotels included in the sale and moved to retitle the properties.

They said the title scam likely ties back to Wu Xiaohui, former head of Anbang Group, one of China’s largest insurers which Dajia took over at the behest of the Chinese government. Wu is serving 18 years in prison in China for fraud and embezzlement tied to $12 billion in losses from a wave of mergers and acquisitions stretching back to 2012. He had more than $1.6 billion in assets confiscated as part of his sentence.

Wu’s misdeeds forced the Chinese government to inject more than 60 billion yuan ($8.5 billion) into the beleaguered insurer to ensure its solvency and changed its name to Dajia Insurance Group.

Dajia claims in court papers that Wu probably was trying to enrich himself and his henchmen with Anbang assets. In their counterclaims, Mirae’s attorneys said Dajia didn’t tell their erstwhile buyers Wu’s allies filed multiple lawsuits in Delaware seeking to enforce arbitration awards that allegedly gave them ownership to the 15 hotels.

“The discovery of the Delaware matters was a shock not only to buyer, but to the title insurers and the lenders” who’d agreed to back the deal, Mirae’s lawyers said. Those parties pulled their backing from the transaction as did Mirae, the attorneys said.

Judge Travis Laster, who is handling the legal dispute over the hotel deal, is also presiding over other lawsuits the Chinese insurer filed challenging what it says are the phony titles and arbitration awards over the hotels. He’s set an Aug. 24 trial for the dispute over the hotel sale.

The deal case is AB Stable VIII LLC v. MAPS Hotel and Resorts One LLC, No. 2020-0310, Delaware Chancery Court (Wilmington). One of the arbitration-award dispute cases is World Award Foundation Inc. v. Anbang Insurance Group Co., No. 2020-0605.

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