Anbang Loses $5B Suit To Force Mirae To Buy Portfolio

Mirae Asset Daewoo Co. has prevailed in a lawsuit filed against it brought by Anbang Insurance Group, which sought to force the South Korean investment bank to go through with a $5.8B deal to buy a portfolio of 15 U.S. hotels from Anbang. The deal was inked before the coronavirus pandemic, but not closed by the time Mirae backed out in April.

Anbang purchased the Strategic portfolio in 2016 for $5.5B, or about $300M less than the price that Mirae Asset agreed to. Anbang, formally known as Dajia Insurance Group Ltd. after the Chinese government took control of it in 2018, had been directed by the government to divest many of it U.S. assets. 

In making his ruling, Judge J. Travis Laster of the Delaware Court of Chancery said that the pandemic didn't trigger a material adverse clause in the deal that would allow its cancellation, because the clause's exemption for calamities or natural disasters included COVID-19.

Even so, Mirae was off the hook because under Delaware law, the target of an acquisition needs to maintain the "ordinary course of business" ahead of a deal closing. Pandemic-related closures and staff cutbacks at some of the portfolio's properties meant the seller was unable to do that, even though Anbang argued that the changes were necessary. 

"Buyer proved that due to the COVID-19 pandemic, Strategic [Hotels & Resorts portfolio] made extensive changes to its business," the judge wrote. "Because of those changes, its business was not conducted only in the ordinary course of business, consistent with past practice in all material respects ... relieving buyer of its obligation to close."

The ruling specified that Mirae would not only be able to get out of the deal, but Anbang has to refund Mirae's $582M deposit, with interest.

Though Mirae has managed to walk away from the deal, it isn't clear that other real estate-related M&As affected by the pandemic will likewise be canceled. Other buyers have tried to get out of recent deals unsuccessfully, such as LVMH's $16B acquisition of Tiffany or Simon Property Group's $3.6B buy of Taubman Centers, the Financial Times reports. In those cases, the parties agreed to lower the purchase price ahead of a judicial ruling, and the deals went forward.

The Strategic portfolio includes the Montage Laguna Beach; JW Marriott Essex House in New York; Ritz-Carlton Half Moon Bay; Westin St. Francis in San Francisco; and Four Seasons Silicon Valley.