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Mirae Trying to ‘Wriggle Out’ of $5.8 Billion Deal, Seller Says

May 1, 2020, 3:44 PM

Mirae Asset Global Investments Co. is relying on legally faulty pretexts to justify its cancellation of a $5.8 billion purchase of 15 U.S. luxury hotels, China’s Dajia Insurance Group contends in an unsealed lawsuit.

Dajia -- which assumed the assets of struggling Chinese insurer Anbang Insurance Group Co. -- says it satisfied all terms of the sale, but Mirae has cited a myriad of reasons why it can’t close, according to the Delaware Chancery Court complaint. With hotels shuttered by the pandemic, Mirae “began efforts to wriggle out” of the deal, according to the 48-page suit seeking to complete the purchase.

The buyout is among nearly 20 transactions that have fallen apart over the last two months, spurring court filings as valuations cratered on government-enacted lock downs. Already, more than half a dozen cases of virus-related deal challenges -- including the Dajia-Mirae dust-up -- are before Delaware judges. The state is the corporate home to more than half of U.S. public companies and more than 60% of Fortune 500 firms. Its chancery court is the premier U.S. venue for resolving big-dollar corporate disputes.

The Mirae deal portfolio of luxury hotels, which Anbang acquired via its acquisition of Strategic Hotels & Resorts Inc., includes 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.

Mirae officials had asked the Beijing-based insurer for more time to close the deal because the required debt financing isn’t immediately available, Bloomberg News reported last month.

Title Problems

Mirae officials contend one of the reasons they called off the acquisition was the discovery that some hotel titles had been improperly recorded with the wrong owners, Dajia said in the suit. In the course of preparing the deal, Dajia officials said they discovered a group of California businessmen had submitted phony titles for six of the hotels involved in the Mirae deal. Dajia executives disclosed their findings to their Mirae counterparts and moved to retitle the properties, the suit said.

The California group also attempted to enforce $180 billion in fictitious arbitration claims in Delaware and California, Dajia officials noted in the suit. The courts ultimately refused to honor the awards. Dajia said it informed Mirae about the attempt at a “fraudulent shakedown” at an appropriate time.

Waiter’s Signature

In a footnote in the suit, Dajia officials say they’ve probed the fake arbitrators who signed the phony awards and found a half-dozen have criminal records. Three others lived in the same R.V. Park in San Rafael, California, Dajia’s lawyers said. One arbitrator was the mother of a member of the group and another worked as a waiter in a Chinese restaurant, who said he signed the fictitious award “without reading it as a favor to a loyal customer,” according to the court filing.

Mirae has argued Dajia delayed telling them about the fraudulent arbitration scam and that caused problems with financing for the deal, according to the suit. That necessitated pulling out of the deal, Mirae officials added.

The Korean company’s attempt to cite the pandemic as a basis to scrap the deal also doesn’t hold water because the agreement specifically excluded pandemics as a “material adverse” event allowing cancellation, Dajia’s lawyers said.

Two years ago, the judge assigned to this case allowed a deal among drugmakers to be scuttled after evidence of wrongdoing by executives. But Delaware courts are known for enforcing contracts, and agreements with pandemic exclusions are going to be hard to beat, said Harris Arch, a portfolio manager at DuPont Capital, which managed $266 million as of April 23.

“Courts are going to be very reluctant to provide a loophole to buyers,” especially when the deals carve out pandemics, Arch said in an interview earlier this week. “I expect many of the deals to close on the terms agreed upon in the original contract.”

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

--With assistance from Gillian Tan and Joshua Fineman.

To contact the reporter on this story:
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story:
David Glovin at dglovin@bloomberg.net

Tina Davis, Peter Jeffrey

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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