What’s next for HNA after purge of Hilton spinoffs

HNA would still need Hilton to agree to a share sale

NEW YORK • Troubled Chinese conglomerate HNA Group Co has sold out of two Hilton related companies so far this month. Now, investors are wondering whether Hilton Worldwide Holdings Inc is next.

To help reduce one of the biggest debt loads in China, HNA purged its ownership in Park Hotels & Resorts Inc earlier this month, and sold its 25% interest in timeshare business Hilton Grand Vacations Inc on Wednesday for US$1.1 billion (RM4.31 billion). In both cases, the Chinese firm found a way to amend restrictions that kept the stock tied up until next year, leading to speculation that a similar allowance could be made for HNA’s 26% stake in Hilton.

“There is a growing expectation among investors that HNA could soon look to sell its shares in Hilton,” Michael Bellisario, a senior research analyst at Robert W Baird & Co, said in an email. A deal announcement could drag Hilton’s stock down initially, but ultimately “removing the overhang would be a positive and we expect that to translate into a higher stock price over time”.
Hilton CEO Christopher
Nassetta has been facing questions about HNA — the hotel company’s largest shareholder — since the Chinese government started cracking down on overseas dealmaking last year.

HNA quickly reversed a buying binge that added tens of billions of dollars in assets, reducing its stake in firms including Deutsche Bank AG and selling properties in London, Sydney and Hong Kong before starting to shed its shares in the two Hilton firms.

“It’s been a question that we’ve had from lots of investors,” Nassetta said in a March 5 interview on Bloomberg Television. “It will eventually resolve itself, and in the interim it does create a little bit of uncertainty, and there’s not a whole heck of a lot that I can do about it.”

HNA acquired shares in Hilton and its two spinoffs, Park Hotels and Hilton Grand Vacations, about a year ago. The Chinese firm paid Blackstone Group LP US$6.5 billion.

HNA would still need Hilton to agree to a share sale. On a call with investors last month, Hilton CFO Kevin Jacobs said the company had an agreement with HNA that “contains protections for shareholders”.

If HNA were to sell its Hilton ownership, it would bank a hefty profit. The shares HNA bought from Blackstone were valued at US$6.7 billion at the close of trading on Wednesday. The Chinese company paid

US$4.5 billion for the stock. HNA cashed in its Hilton Grand Vacation investment for 90% above what HNA originally paid. The company just about broke even on Park Hotels, which owns properties including the Hilton San Francisco Union Square and the New York Hilton Midtown. — Bloomberg