South Korea’s Mirae Asset Global Investments has terminated a deal to buy 15 U.S. hotels from China’s Anbang Insurance Group, citing the seller’s alleged breach of contract.

Mirae Asset said on Monday that a termination notice was sent to Anbang on May 3 over the sale and purchase agreement they signed in September 2019 for the
15 US luxury hotels for $5.8 billion. The South Korean asset manager also asked the escrow agent to return its 10 percent deposit of $580 million.

Mirae Asset notified the seller of the contractual problems on April 17 and its right to terminate the deal if the issue was not solved within 15 days. The asset manager said that Anbang did not remedy breaches of certain obligations regarding the September contract, resulting in the termination of the deal.

“Although Anbang was in breach of certain material obligations, it sought to close the transaction on April 17,” a Mirae Asset official said. “The seller failed to disclose and discharge various material encumbrances and liabilities impairing the hotels in a timely manner.”

The South Korean asset manager said that Anbang’s ongoing litigation in the U.S. constituted a breach of their contract terms. The Chinese insurer was embroiled in lawsuits with a third party over the ownership of 20 hotels since 2017, which includes 15 hotels Mirae Asset planned to acquire. The third party is said to be a U.S.-based company.

“At the time when Mirae Asset and Anbang signed the contract, Mirae Asset knew about Anbang’s ongoing legal dispute with a third party. As far as I know, Mirae Asset stated in the contract that Anbang has to resolve the legal issues,” an investment banking industry source said. “The problem is Anbang has lost the first stage of the court battle against the third party, raising the possibility that Anbang will fail to fulfill prerequisites.”

Two parties are likely to face a lengthy legal battle over the deal. Anbang has filed a lawsuit against Mirae Asset in the Delaware Chancery Court, alleging the buyer had failed to complete payment, which was supposed to be finalized by April 17. Following the Anbang’s unexpected lawsuit, there have been doubts whether Mirae Asset was facing difficulties in raising the money.

Mirae Asset has hired Yulchon to represent it in Korea while it plans to hire a local attorney to represent it in the U.S. (By reporter Kim Byung-yoon)