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China's HNA to buy 25 percent stake in Hilton for $6.5 billion

Published 10/24/2016, 10:35 AM
Updated 10/24/2016, 10:35 AM
© Reuters. Logo of Hilton hotel is seen in Batumi

By Ankit Ajmera

(Reuters) - Chinese aviation and shipping conglomerate HNA Group said on Monday it would buy about 25 percent of hotel operator and manager Hilton Worldwide Holdings Inc from biggest shareholder Blackstone (NYSE:BX) Group LP for $6.5 billion.

Shares of Hilton, whose brands include Conrad Hotels & Resorts, Curio and Double Tree as well as Hilton, rose as much as 3.71 percent to $23.76 in early trading.

HNA Group will buy the stake for $26.25 per share, representing a premium of 14.6 percent to Hilton's closing price on Friday and valuing the hotel company at about $26 billion.

Blackstone took Hilton private in 2007 for $26.7 billion, including debt. In 2013, the private equity firm listed the company in the biggest-ever hotel IPO. (http://reut.rs/2exryfE)

This is HNA Group's second investment in the U.S. hospitality industry this year.

The company agreed in April to buy Carlson Hotels Inc, the owner of the Radisson hotel chain, including its 51.3 percent majority stake in Rezidor Hotel Group AB, for an undisclosed sum.

Chinese companies have been splurging on foreign acquisitions to sidestep slowing growth at home.

Overseas mergers and acquisitions by Chinese companies have touched a record $181 billion so far this year, about 70 percent more than the whole of last year.

HNA Group's Avolon Holdings agreed earlier this month to buy CIT Group's aircraft leasing assets worth $10 billion in a deal that will create the world's third-largest lessor.

However, Chinese insurer Anbang Insurance Group Co, which bought the iconic Waldorf Astoria in New York in 2015, abandoned its pursuit of Starwood Hotels & Resorts Worldwide (NYSE:HOT) following a bidding war with Marriott International Inc.

Marriott completed the acquisition of Starwood in September to create the world's biggest hotel chain. (http://reut.rs/2exdDpz)

HNA Group said on Monday it will also own a stake of about 25 percent in Hilton's real estate and timeshare businesses, following their expected separation by the end of 2016.

The deal will allow the HNA Group to appoint two directors to Hilton's board, raising its size to 10.

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

Evercore was the financial adviser to Hilton, while JPMorgan (NYSE:JPM) advised HNA.

© Reuters. Logo of Hilton hotel is seen in Batumi

Up to Friday's close, Hilton's stock had risen about 7 percent this year, compared with the 1.5 percent decline in the Dow Jones U.S. Travel & Leisure index.

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