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Global Eagle Entertainment Inc (NASDAQ:ENT) Tanks After Deal Cancellation

Global Eagle Entertainment Inc. (NASDAQ:ENT)

Global Eagle Entertainment Inc (NASDAQ:ENT)

Shares of Global Eagle Entertainment Inc (NASDAQ:ENT) tumbled 11.04% after a proposed $416 million investment in the company by HNA Group failed to gain regulatory approval. The company has since canceled the deal in the Committee on Foreign Investment in the United States (CFIUS) failing to complete its security review as agreed.

There is no word on why the authorities failed to approve the deal. However, it has emerged that concerns over customer data protections by Global Eagle Entertainment Inc (NASDAQ:ENT)’s Wi-Fi Service might have played a role in the agency’s decision.

The deal suffered its first blow in April when Chief Executive Officer, Jeffrey Leddy, confirmed that the CFIUS had discovered potential national security concerns on the deal going through in the proposed format.

HNA group had reached an agreement to acquire a 34.9% stake in Global Eagle Entertainment Inc. (NASDAQ:ENT) late last year. The deal would have made the Chinese company the single largest shareholder of the provider of satellite based connectivity. The two companies also planned to form a Chinese joint venture focused on in-flight connectivity as well as entertainment.

CFIUS Conservative Stance

The conservative stance of CFIUS raises concerns of current deal approvals – especially from Chinese companies. The sale of Inseego Corp’s MiFi hotspot unit to Chinese smartphone maker TCL has already suffered from the effects of the agency’s strict stance.

The collapse of the HNA Group investment in Global Eagle Entertainment Inc (NASDAQ:ENT) is already raising doubts of a proposed $1.2 billion investment by Ant Financials in MoneyGram going through. China Oceanside Holdings proposed $2.7 billion investment in Glenworth Financial Inc. may also be on the brink of collapse given that the deal also involves customer data.

Separately Global Eagle Entertainment Inc. (NASDAQ:ENT) has a won a five-year contract to provide in-flight entertainment to all 120 of Norwegian’s Air Shuttle’s Boeing 737 fleet.

“Our cooperation with Norwegian improves how its passengers experience the airline’s in-flight entertainment service on board. We currently have Global Eagle passenger features on more than 100 Norwegian aircraft, and this agreement widens the scope of both the fleet size and products that the airline can offer on board,” said Per Noren, Global Eagle Entertainment Inc (NASDAQ:ENT) Senior VP Aviation.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

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Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

1 Comment

  1. HNA can buy Global Eagle’s service if they wish. Greenfield investments are welcome. M&A from China – not so much. You can blame Beijing’s “Made in China 2025” plan for Western concern. Also, lack of reciprocity from China in allowing M&A from West. It’s not a matter of CIFIUS being conservative, it’s a matter of CIFIUS reacting to increased efforts by the Chinese state to acquire strategic technology.

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