China's HNA Group buys $6.5 billion stake in Hilton, extends hotels push

Tue Oct 25, 2016 7:13am EDT
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By Ankit Ajmera and Denny Thomas

(Reuters) - China's aviation and shipping giant HNA Group extended its push into hotels and Chinese tourism on Monday, paying $6.5 billion to buy a 25 percent stake in Hilton Worldwide Holdings Inc (HLT.N: Quote) from biggest shareholder Blackstone Group LP (BX.N: Quote).

The deal marking the second investment in the hotel industry this year by ambitious and fast-growing HNA, now the operator of more than a dozen airlines including flagship carrier Hainan Airlines Co (600221.SS: Quote) and a group with more than $100 billion in assets. In April HNA bought Carlson Hotels Inc, owner of Radisson hotels, for an undisclosed sum.

It also comes as Chinese companies step up hotel deals to tap free-spending mainland China tourists, now traveling overseas in record numbers. Their spending at home and abroad is expected to hit $72 billion this year, according to China Travel Academy, a government-backed research institute.

Chinese companies have also been splurging on foreign acquisitions to sidestep slowing growth at home. The HNA deal would take China's overseas M&A to a record $191 billion so far this year, more than 70 percent of 2015's tally.

HNA agreed to buy its shares in Hilton for $26.25 each, a 14.6 percent premium to Hilton's Friday's closing price, valuing the whole of Hilton at about $26 billion. Blackstone took Hilton private in 2007 for $26.7 billion, including debt, and the private equity firm listed the company in 2013 in the biggest-ever hotel IPO.

Shares in Hilton, whose brands include Conrad Hotels & Resorts, Curio and Double Tree as well as Hilton, ended flat in New York on Monday after rising as much as 3.7 percent to $23.76 in early trading on news of HNA's stake buy.

Established in 1993, HNA has emerged under the stewardship of co-founder and chairman Chen Feng as one of China's most acquisitive overseas dealmakers, having announced about $20 billion of deals this year alone, according to Reuters calculations.

As well as buying aviation assets, HNA has been investing in other travel-related businesses, including Swiss airline catering firm Gategroup Holdings GATE.S, and U.S.-listed electronics distributor Ingram Micro IM.N. It now controls 11 companies listed on mainland China and Hong Kong stock markets.   Continued...

A view shows the Hilton hotel in central Kiev, Ukraine, April 4, 2016. REUTERS/Gleb Garanich/File Photo