Status: Prefiling

Acquirer: HNA Group (International) Co., Ltd. (Hong Kong, SAR China); Pactera Technology International Limited (China)

Acquired: Ness Technologies S.A.R.L. (Luxemburg); Jersey Holdings Corporation (US)

Value: Approximately US$325 million

On December 6, 2017, Ness Technologies S.A.R.L., a Luxemburg company, and its subsidiary Jersey Holdings Corp. filed a civil action in New York State court against Pactera Technology International Limited and HNA Group (International) Co., Ltd., for alleged injuries arising from the failed sale of Jersey Holdings to Pactera. (See Complaint ¶¶ 1-2, Ness Technologies S.A.R.L. v. Pactera Technology International Limited, No. 657241/2017 (N.Y. Sup. Ct. Dec. 6, 2017) (hereinafter “Complaint”). Ness Technologies is a US headquartered global software company that develops and engineers custom software solutions for a wide range of industries. (See Ness Technologies website.) Pactera is a Chinese based “global company offering consulting, digital, technology and operations services to the world’s leading enterprises.” (Pactera Technology International website; see also Pactera Technology International Ltd. Form 20-F, Mar. 20, 2014, SEC Filing.) The HNA Group is Chinese based conglomerate with a diversified group interests operating in “six core pillars: HNA Technology, HNA Tourism, HNA Capital, HNA Holding, HNA Innovation Finance and HNA Modern Logistics.” (HNG Group website, About webpage.) The “HNA Group (International) Company Limited is an investment holding subsidiary of the Group established in Hong Kong serving as a strategic platform for internationalisation of business.” (HNA Group (International) Company Limited LinkedIn webpage.) In 2017, ownership of Pactera was sold to HNA EcoTech, the “technology unit” of the HNA Group. (Dow Jones, HNA Group Unit to Buy Chinese Tech Outsourcing Firm From Blackstone for About $675 Million in Cash, Oct. 5, 2016; see also Pactera website, Company webpage, noting “Pactera be[came] part of HNA Group” in 2017.)

According to the Complaint, on March 31, 2017, Ness Technologies allegedly entered into an agreement with Pactera, with the purchase price guaranteed by HNA Group, to sell Jersey Holding, which holds subsidiaries engaged in providing “platform development and digital product engineering services to customers worldwide.” (Complaint, ¶¶ 2-4.) Ness Technologies alleges that CFIUS was a closing condition under Section 8.01(c) of purchase agreement (id. ¶¶ 5, 27, 33), but that Pactera failed to use the required “reasonable best efforts” to achieve clearance. (Id. ¶ 9.) Ness Technologies alleges that Pactera and HNA Group “worked to evade and frustrate CFIUS’s ability to investigate and review the Transaction,” (id. ¶ 10), including by submitting a notice to CFIUS with “demonstrably and knowingly false, inconsistent, and misleading information” and providing “false, different, and inconsistent information to CFIUS” during the prefiling and follow up questions from CFIUS. (Id. ¶ 12.)

Ness alleges that the parties prefiled their joint notice on April 27, 2017, (id. ¶ 49); a CFIUS staff member was assigned to review the case on May 1, 2017, (id. ¶ 50); prefiling comments were provided by CFIUS on May 10, 2017, (id. ¶ 51); a revised prefiling draft was submitted on July 7, 2017, (id. ¶ 66.); prefiling comments were provided for the revised draft by CFIUS on July 19, 2017, (id. ¶ 67); a third revised version was filed on October 6, 2017 (id. ¶ 87); a third set of prefiling comments were sent by CFIUS on October 23, 2017 (id. ¶ 88); and a fourth draft Notice was filed with CFIUS on November 8, 2017, which was updated on November 20 (id. ¶¶ 97-98). Ness alleges that the July 19, 2017 CFIUS prefiling comments contained 22 questions addressed to HNA Group concerning the “HNA Group’s corporate structure, ownership, and relationships with the Chinese government,” (id. ¶¶ 67-68), and the third set of comments on October 23 had 15 questions, “most of which targeted HNA Group’s corporate structure, ownership, and control.” (Id. ¶ 89.)

Ness alleges that as of the outside closing date of October 27, 2017, a formal review had not yet commenced, (id. ¶¶ 14, 95), and that CFIUS informed the parties on October 24 that “CFIUS could not accept the Notice or begin the formal review period until they had resolved all of their questions about the completeness and accuracy of the Notice.” (Id. ¶ 90.) Ness further alleges that “[a]s of the date of this Complaint [December 6, 2017], CFIUS has not yet accepted the parties’ Notice and formally begun the review and investigation process.” (Id. ¶ 101.)

In addition, the Complaint alleges that the HNA Group was going through a similar process concerning its pending draft Notice with CFIUS for its acquisition of SkyBridge Capital. (See e.g., id. ¶¶ 76-77 (delaying notice “to ensure that the SkyBridge-HNA Capital and Ness-Pactera Notices were consistent . . .”; see also Blog Post on SkyBridge Capital-HNA transaction here.)