No hospitality merger or acquisition is ever as simple as it seems and, as this case shows, hotel buyers need to consider what kind of impact their purchases may have on their other investments.
Angry shareholders of Spanish hotelier NH Hotel Group have forced out its CEO, Federico González Tejera, as well as four of its board members, in a move aimed directly at the company’s largest shareholder, HNA Group, the same Chinese company that announced its plans to buy Carlson Hotels for an undisclosed sum in April.
The shareholders, most of whom are affiliated with London-based hedge fund Oceanwood Capital (which owns 11% of NH Hotel), and Grupo Inversor Hesperia SA, earlier this month proposed removing directors representing HNA, which owns nearly a third of NH Hotel Group.
Oceanwood and Hesperia believe that, following HNA’s acquisition of Carlson Hotels, whose brands include Radisson and Radisson Blu, its subsequent 51.3% ownership stake in competitor Rezidor Hotel Group would be a major conflict of interest. In a June 9 report issued by proxy advisor Institutional Shareholder Services Inc., shareholders were urged to vote in favor of Oceanwood Capital’s proposal.
That vote took place on June 21 at NH Hotel Group’s annual general meeting in Madrid, resulting in the removal of CEO Tejera as well as four other members of the board, including former co-chairman and chairman of the board Charles Bromwell Mobus Jr.
A statement released by the NH Hotel Group Board on June 22 said: “The overwhelming decision of the shareholders declared the existence of a conflict of interest among HNA Group Co Limited representatives on the board of directors of NH Hotel Group.”
No new CEO has been announced but the company did list the names of the four new board members. The release also said, of former CEO Tejera: “Since he joined, the company has made great strides in improving the brand. NH Hotel Group is in a much better place now than it was than when he joined. He leaves behind a strong, motivated and committed team.”
The statement concluded with the NH board saying it “is willing to work with HNA to resolve the conflict of interest created by the Carlson Rezidor transaction and, if appropriate, will look for the mechanism to welcome them back to the board … The current focus is to make NH Hotel Group stand robust as an independent entity whilst achieving best in class corporate governance practices.”
Carlson and Rezidor’s Role in the Leadership Shuffle
Once HNA’s purchase of Minnetonka-based Carlson Hotels is completed, HNA will have to decide what to do with its subsequent majority stake in Brussels-based Rezidor Hotel Group, and whether or not to increase it or sell it off.
Earlier this month, Rezidor CEO Wolfgang Neuman said HNA has big plans to transform Rezidor into a “hotel chain on a global level” and may possibly combine it with Madrid-based NH Hotel Group. Neuman told Bloomberg on May 26: “The priority is to consolidate Carlson Rezidor and then we will study the possibility of integrating with NH.”
NH and HNA had no comment regarding Neuman’s statements, but it’s clear that NH shareholders Oceanwood and Hesperia felt very strongly about HNA’s possible conflicts of interest in being a majority stakeholder of both Rezidor and NH at the same time.
In a written response to the removal of HNA’s board member representatives, Mobus, writing on behalf of HNA, said he believed this was a move by Oceanwood and Hesperia to force HNA to acquire NH Hotel Group, whose brands include NH Hotels, NH Collection, NHow, and Hesperia Resorts.
“Make no mistake, a group of hedge funds that acquired shares in NH Hotel after HNA made its initial investment are seeking to realize short-term profits by trying to force HNA to make a tender offer to acquire the 71.5% of NH Hotel’s outstanding shares that it doesn’t already own,” Mobus wrote.
He added that “HNA has no imminent plans to change the profile of its investment. We will continue to be an active, vigilant shareholder. HNA will not be coerced into launching a tender offer to meet the short-term return needs of an ‘event driven’ hedge fund at the expense of NH Hotel, its employees, and other shareholders.”
HNA’s History of Global Tourism Investments
HNA is an established, global tourism player with interests in multiple travel brands around the world. Aside from being the largest shareholder in Spanish hotelier NH Hotel Group SA as well as Spokane, Washington-based Red Lion Hotels Corporation, it also owns Swissport International, and has a stake in the Azul airline, among others. It also runs Hainan Airlines, one of China’s largest regional carriers.
HNA’s Tourism Group was founded in 2007 and its most recent acquisition, prior to the Carlson Hotels acquisition, involved purchasing London-based International Currency Exchange, which operates currency exchange booths in airports around the world.
HNA’s involvement with NH Hotel began in 2013. In his letter to shareholders, Mobus wrote, “Three years ago, HNA Group rescued NH Hotel Group from the brink of failure by providing a necessary capital infusion.”
In a similarly related shareholder struggle, HNA was also reportedly in talks with Paris-based Accor Hotels CEO to thwart the attempts of Chinese-owned Jin Jiang from increasing its ownership stake in Accor from 15.6% to 29%, according to Reuters. That same article also noted HNA’s 10 percent ownership in holiday group Pierre et Vacances and that the company is considering a purchase of Servair, Air France’s catering subsidiary.
NH Group will eventually have to find a new CEO, and HNA will have to figure out a way to get its representatives back on the board of NH Group.
HNA will also have to determine whether or not it will increase its ownership stake in Rezidor, or if it will decide to sell it in order to avoid a conflict of interest once its acquisition of Carlson Hotels is completed.
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Photo credit: The NH Collection Eurobuilding in Madrid. NH Hotel Group