Skift Take

NH Hotels has been on a corporate rollercoaster ride over the past couple of years with HNA Group’s minority shareholding being the principle catalyst. Things have quieted down recently but harmony likely depends on the identity of the new investor.

NH Hotel Group doesn’t want a rival hotel company taking over HNA Group’s 29 percent stake in the company.

The Chinese conglomerate said in January it would explore the potential sale of its minority shareholding in the Spanish hotel group, and it looks like it has seen some interest.

“We have been monitoring the situation very closely and have been approached by several potential buyers for all or part of the stake,” Alfredo Fernandez Agras, co-chairman of NH told analysts on an earnings call Thursday.

Fernandez Agras said NH was waiting to hear “from investors that want to add value and are willing to participate in the evident consolidating industry trends,” but that NH would not welcome “an industrial hotel operator as minority investor” because it would “constrain our future strategic options.”

Before HNA outlined its plans, rival Spanish hotel group Barcelo made an offer to merge the two companies. NH rejected the approach but at the same time the board said the dismissal should not prejudice any future development.

Reading between the lines it seems NH fears that another hotel group taking almost a third of the company would make a larger takeover, merger, or acquisition much more difficult.

“I can only say you that the different parties we’ve met are parties that will be very interested… [in] growing the company farther and [creating] additional value and that they see NH as a group platform to grow…” Fernandez Agras said.

“I cannot add more. We are the subject of a transaction, the seller is HNA. They control the timing and who ultimately would buy the stake.”

HNA Sell-off

HNA Group is busy trying to sell-off some of the companies it bought during an acquisition binge, as it attempts to service its mounting debt pile.

Skift List of Major Chinese Hotel Assets Outside China

Asset City Owner Year Price
Hilton Worldwide* McLean, Virginia HNA Group 2016 $6.5 billion
Strategic Hotels Chicago Anbang 2016 $6 billion
Carlson Rezidor Hotels** Brussels HNA Group 2016 $2 billion
Waldorf Astoria New York Anbang 2014 $1.95 billion
Louvre Hotels Nanterre, France Jing Jiang Intl. 2015 $1.37 billion
NH Hotel Group*** Madrid HNA Group 2011 $620 million

Source: Skift, public disclosures
Note: HNA owns a 25 percent stake in Hilton and a 29 percent stake in NH Hotels. It owns 100 percent of Carlson Hotels and a 70 percent stake in Rezidor Hotel Group. Together, Carlson Hotels and Rezidor Hotel Group make up Radisson Hotel Group (formerly known as Carlson Rezidor Hotels).

It is targeting sales worth $16 billion in the first half of 2018, some of which could include its numerous travel brands.

HNA’s relationship with NH has often been fraught. Matters came to a head in 2016, when its takeover of Carlson Hotels — and its stake in the Rezidor Hotel group — resulted in a war of words with other shareholders and the eventual ousting of then-CEO Federico J. González, and four of board members.

Detente was eventually established but there’s a sense that HNA’s part-ownership has left the hotel group in limbo. Might Barcelo come in with a new offer or could we see an activist investor take over HNA’s stake and push for a merger with another European hospitality company?

The numbers

Despite the issues surrounding NH’s shareholders and board make-up in recent years, the company has done an excellent job turning itself around.

Revenue rose 7 percent in 2017 to $1.9 billion (€1.5 billion) and pre-tax profit increased 64 percent percent to $90 million (€73 million), in the year to the end of December 2017.

The picture is very different to the one five years ago, when the company wrote down assets totaling $245 million (€199 million) and announced a pre-tax loss of $484 million (€393 million). Since then the position has steadily improved: revenue has risen and losses have turned to profits.

NH Hotels operates almost 400 hotels in 30 markets across Europe, the Americas and Africa. Its best performing market last year was Benelux, which generated $418 million (€339 million) of revenue, up 13 percent from 2016. Spain was another strong performer.

“We expect NH to continue to deliver on a strong operational performance reflecting the success of its repositioning program coupled with positive momentum in its core regions,” said Najet El Kassir, an equity analyst at Berenberg. “In addition, the M&A optionality remains with the ongoing sales of HNA stake.”

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Tags: hna, mergers and acquisitions, nh hotels

Photo credit: NH Hotel Group's minority shareholder HNA Group wants to sell its stake in NH Hotels. NH Hotel Group

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