Last night when we discussed the latest acquisition by the Chinese financial conglomerate China Oceanwide of Genworth we said that “Should the deal close, it will likely unleash a surge of more Chinese acquisitions of questionable US companies, leading to even more short squeezes on concerns that the “Chinese are coming.” We didn’t have long to wait: moments ago another Chinese conglomerate, HNA Group, announced it had acquired a 25% equity stake in Hilton Worldwide Holdings from Blackstone for $6.5 billion, or $26.25 in cash.
The deal represents a ~15% premium to HLT’s last close $22.91 and reduces Blackstone’s interest in Hilton to ~21%. Blackstone will keep 2 seats on HLT board, including Jon Gray who will remain chairman. According to Bloomberg, HNA will enter into a stockholders pact with HLT, and into similar agreements with Park Hotels & Resorts and Hilton Grand Vacations, effective upon closing. The deal allows HNA to appoint 2 directors (1 HNA member, 1 independent member) to HLT’s board, bringing total to 10 members.
Furthemore, HNA agrees to some restrictions on selling stake for 2 yrs, and will vote shares in excess of 15% proportionally with holders.
This is the latest major transaction by HNA in the US: the Chinese conglomerate owns Hainan Airlines, China’s fourth-largest airline. This year, in a flurry of dealmaking, the company unveiled transactions to buy Ingram Micro, a US information technology group, Carlson Hotels, the US owner of the Radisson brand, and a 13% stake in Virgin Australia, the Australian airline. Another HNA deal this year to buy Gategroup hit a snag on Monday after the conglomerate said in a preliminary statement that investors holding 61 per cent of the Swiss aviation catering company’s stock had tendered their shares. HNA, which had said its offer was conditional on a 67 per cent acceptance level, is due to issue a final statement on Thursday.
As the FT reported previously, HNA’s deals have helped boost Chinese M&A to a record $121.1bn in the first six months of 2016 — a record for a single year.
“With such a good opportunity now in M&A if we’re provided the chance of global good quality assets that benefit our core business, of course we have to do M&A,” says Mr Chen. “Otherwise it’s a lost opportunity.”
Absent Congressional intervention, expect China’s money-laundering purchases of flagship US companies to accelerate in the coming months.
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