WASHINGTON — U.S. regulators have thwarted a proposed joint venture between satellite connectivity provider Global Eagle Entertainment of Marina del Rey, California, and Beijing Shareco Technologies of China.
In a July 25 filing to the U.S. Securities and Exchange Commission, Global Eagle said it and Shareco terminated the investment agreement “as a result of the parties’ inability to obtain the required approval of the Committee on Foreign Investment in the United States (CFIUS) prior to the outside date under the Shareco Investment Agreement.”
As part of the joint venture, Shareco, which is part of the Chinese conglomerate HNA Group, was expected to invest up to $416 million for a 34.9 percent ownership stake in Global Eagle. The deal ran into trouble in April when CFIUS — a regulatory body tasked with gauging national security risks surrounding transactions that could give foreign entities control of American businesses — balked at the proposed tied up.
Global Eagle Chief Executive Jeff Leddy, who had only recently filled the void made by the abrupt departure of Dave Davis, said at the time that CFIUS had “concluded that the deal, as originally constructed, presented unresolved national security concerns.”
Shareco was to be the majority owner of the joint venture with 51 percent; Global Eagle would own the remaining 49 percent. The investment in Global Eagle would have also given Shareco the right to nominate members on Global Eagle’s board of directors “proportionate to its ownership position in GEE.” Global Eagle was to invest up to $150 million into the joint venture.
The main purpose of the joint venture was to enable Global Eagle to provide inflight entertainment and connectivity services to HNA-owned airlines. The joint venture would have granted Global Eagle the ability to sell antennas, network services and other equipment to HNA aircraft on an exclusive basis. HNA Group tallied more than 1,250 aircraft at the end of 2016.
Global Eagle said it will still be able to serve three of the 14 airlines under the HNA Group.
“Notwithstanding the termination of the Shareco Investment Agreement and its related agreements, we and Shareco continue to perform under a pre-existing commercial agreement for our provision of inflight-entertainment-and-connectivity (IFEC) equipment and services to Hainan Airlines, Beijing Capital Airlines and Yangtze River Airlines, all of which are HNA-affiliated airlines,” Global Eagle wrote in its filing. “The Company and HNA continue to discuss opportunities to expand their relationship in the Chinese market for IFEC equipment and services.”
In November, Global Eagle said it has been providing IFEC servicing in China since 2013, and has an office as well as teleport infrastructure in the country.