China's HNA buys US $6.5 billion stake in Hilton

Aviation and shipping giant doubles its involvement in hotel operators after it bought Carlson Hotels in April

The US $6.5 billion deal will buy the Chinese firm a 25% stake in Hilton Worldwide. File photo used for illustration purposes.
The US $6.5 billion deal will buy the Chinese firm a 25% stake in Hilton Worldwide. File photo used for illustration purposes.

China's HNA Group extended its push into hotels and Chinese tourism, paying US $6.5 billion to buy a 25% stake in Hilton Worldwide Holdings.

Aviation and shipping giant HNA is said to buy the stake from the biggest shareholder Blackstone Group LP (BX.N).

The deal marks the second investment in the hotel industry by HNA this year alone. HNA operates more than a dozen airlines including flagship carrier Hainan Airlines Co and a group with more than $100 billion in assets.

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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% of 2015's tally.

HNA agreed to buy its shares in Hilton for $26.25 each, a 14.6% 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% to $23.76 in early trading on news of HNA's stake buy.

As well as buying aviation assets, HNA has been investing in other travel-related businesses, including Swiss airline catering firm Gategroup Holdings. It now controls 11 companies listed on mainland China and Hong Kong stock markets.

In hotel deals, however, it hasn't all been plain sailing for would-be Chinese buyers.

Meanwhile HNA's latest deal will see it appoint two directors to Hilton's board, raising its size to 10.

It will also give HNA a stake of about 25% in Hilton's real estate and timeshare businesses, following their expected separation by the end of 2016.

Blackstone will continue to have two seats on Hilton's board, including Jonathan Gray who will remain as chairman.

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