China’s continued investment in U.S.-based hospitality assets took its most significant turn yet on Monday when HNA Group agreed on Monday to buy about 25% of Hilton Worldwide Holdings from Blackstone Group for about US$6.5 billion (US$26.25 a share in cash and a 15% premium to Hilton’s closing price of US$22.91 on Friday).
HNA in April agreed to buy Carlson Hotels and its majority stake in Rezidor Hotel Group, and last year purchased a minority stake in Red Lion Hotels Corp. It also owns about a 30% share in NH Hotels, Madrid.
R.W. Baird analyst David Loeb wrote Monday that his firm views the transaction positively as “it demonstrates the undervalued nature of Hilton’s shares, solidifies our belief that foreign capital remains active in its pursuit of high-quality hotel brand/real estate investments, and reduces the perceived Blackstone overhang given that HNA has a two-year standstill agreement and has a much longer-term investment horizon than Blackstone.”
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. Blackstone, whose stake will be reduced to about 21% of Hilton, will keep two seats on Hilton’s 10-member board, including Chairman Jon Gray.
HNA also will own a 25% stake in Park Hotels & Resorts, the planned spinoff of Hilton’s real estate, and Hilton Grand Vacations, the company’s timeshare business.
The deal also states that HNA, who will become Hilton’s largest shareholder, can’t sell any of its stake in Hilton for two years and can’t increase its holding to more than 25% without Hilton’s consent.
HNA, the parent company of Hainan Airlines, has US$90 billion of assets, US$30 billion in annual revenues and an international workforce of nearly 200,000 employees across North America, Europe and Asia.