HNA to buy USD6.5b Hilton stake from Blackstone

China’s HNA Group agreed to acquire about 25 percent of Hilton Worldwide Holdings Inc. from Blackstone Group LP for about USD6.5 billion, easing the overhang that had hampered the hotel company’s stock since its December 2013 initial public offering.
HNA, controlled by Chen Feng, will pay $26.25 a share in cash in a transaction that cuts Blackstone’s interest in Hilton to about 21 percent, the companies said in a statement yesterday.
“This investment is consistent with our strategy to enhance our global tourism business, and we look forward to working together on new initiatives that leverage our respective strengths, expertise and tourism platforms,” Adam Tan, vice chairman and chief executive officer at HNA Group, said in the statement.
Chinese firms have been stepping up investments in hotel and travel businesses around the world as outbound travel surges and because yields from the underlying real estate typically are higher than from other properties. HNA in April agreed to buy Minneapolis-based Carlson Hotels Inc. and its majority stake in Rezidor Hotel Group AB, and last year purchased a minority stake in Red Lion Hotels Corp.
The deal, expected to be completed in the first quarter of 2017, allows HNA to appoint two directors to McLean, Virginia-based Hilton’s board. HNA also will own a pro-rata stake in Park Hotels & Resorts, the planned spinoff of Hilton’s real estate, and Hilton Grand Vacations, the company’s timeshare business, according to the statement.
HNA can’t sell any of its stake in Hilton for two years and can’t increase its holding to more than 25 percent without Hilton’s consent, according to the statement.
Blackstone bought Hilton in October 2007 for $26 billion in what was the last major real estate buyout before the financial crisis. The enormous debt burden from the buyout, a joint deal between Blackstone’s real estate and private equity funds, needed to be restructured when credit markets seized up and forced Blackstone to put in an additional $800 million of cash to salvage the deal. After expanding its room count by a third under CEO Christopher Nassetta, Hilton went public in December 2013 in a record IPO for a hotel company, raising more than $2.35 billion.
The overhang of Blackstone’s majority ownership, however, capped gains in Hilton stock, which has risen 16 percent, including reinvested dividends, since the IPO. By comparison, Marriott International Inc. shares have returned more than 51 percent.
HNA Group, started in 1993, has transformed itself from a traditional aviation company to a conglomerate whose business spans finance, leasing, hotels and real estate. The company, parent of Hainan Airlines, said it has $90 billion of assets, $30 billion in annual revenues and an international workforce of nearly 200,000 employees across North America, Europe and Asia. Bloomberg