HNA Group Wants To Sell Their Stake In Hilton

In late 2016 it was announced that HNA Group would be buying a roughly 25% stake in Hilton from Blackstone, for a price of about $6.5 billion. HNA Group is a Chinese conglomerate that owns companies in various industries, especially the tourism sector.

HNA Group has stakes in about a dozen Chinese airlines (including Hainan Airlines), Hilton, and Carlson, just to give a few examples. The company has been in deep financial trouble for the past several months. The company’s chairman describes these problems as arising because they made a big number of mergers in a short period, and because they’ve transitioned from rapid to moderate growth, which has impacted their access to new financing. With rate hikes by the federal reserve, this has caused a liquidity shortage for many Chinese businesses, including HNA Group.

This liquidity shortage has turned into a crisis for some of HNA Group’s airlines, as they haven’t been able to make lease payments, and in some cases are even unable to pay for jet fuel.

To most, HNA Group is a bit of a mystery, with limited information regarding who is behind the company, and where they’re getting all their money from.

In a move that certainly won’t do anything to further peoples’ confidence in HNA Group, the company has announced that they plan to sell some or all of their stake in Hilton. The company owns a 26.1% stake in the hotel giant, making them Hilton’s largest shareholder. When HNA’s investment was first announced, their stated purpose was as follows:

“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 to provide travelers more choice, value and world-class services.”

While there was perhaps a long term plan to connect their various businesses somewhat, we didn’t see many changes to Hilton since they finalized their stake. A 26.1% stake is a big sale, so I’m curious to see what goes down here. We’ve seen a lot of consolidation in the hotel industry the past few years, and I’ll be curious to see if this once again leads to further merger speculation, or if we’ll simply see an outside company come in and invest, given that HNA seems to be in a bind.

Comments

  1. Tump Change 6 billion
    No pun intended
    I have a casino I’d like to sell them in Atlantic City 😉

  2. “because they’ve transitioned from rapid to moderate growth, which has impacted their access to new financing.”

    Sounds like a pyramid scheme. Or a serious misuse of leverage where you use income from one property to finance another and so on, until something goes wrong and you are screwed.

    Like most Chinese companies it is probably controlled by the government.

  3. This can only be seen as a good development for Hilton. HNA Group is indeed “a bit of a mystery, with limited information regarding who is behind the company, and where they’re getting all their money from”…just like Anbang[1], which tried to acquire Starwood, inexplicably dropped its bit and has now been taken over by the Chinese after canning its CEO. Not the sort of shadowy companies one would want to be associated with!

    Maybe now with HNA Group out, Hilton properties in PRC will come back into the fold and stop opting out of Hilton Honors’ global promos…

    [1] Speaking of Anbang, its appears that the Chinese government just decided to bail out the financially troubled insurance company (maybe HNA Group will be next?):

    “2018/04/04
    Chinese Government Announces $10B Bailout of Anbang Insurance

    China’s government is injecting RMB 60.8 billion ($9.67 billion) into Anbang Insurance Group after the embattled insurer was taken over by the insurance regulator in February and its chairman put on trial on fraud charges last week.

    The newly merged banking and insurance regulator, China Banking and Insurance Regulatory Commission (CBIRC), approved the capital injection from the China Insurance Security Fund (CISF) on March 28, according to a statement on its website Wednesday.”

  4. They announced they were selling their stake in Park Hotels (Hilton spinoff with most of Hilton’s real estate assets), then they announced they were selling their stake in Hilton Grand Vacations (another Hilton spinoff), and finally they announced the sale of the stake in Hilton Worldwide (the hotel management business). They could have just announced it all at once.

  5. HNA is desperate for liquidity (i.e. cash), because they need to repay some of their loans, in order to renew some others. They try to sell anything which provides quick cash.

    However, sometimes it’s more difficult. Last week, their IPO of GateGourmet failed because investors feared that they might have to sell off all at once. So the Hilton option, being several pieces, might be more feasible.

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