HNA Group was rumoured to be looking at a sale of Radisson Hotel Group, less than two years after buying the company and a majority stake in the former Rezidor Hotel Group.
Radisson Hotel Group did not deny the story, leading to speculation that a summer deal was likely, as the Chinese investor continued to pull back from its overseas investments.
John Kidd, CEO & COO, Radisson Hotel Group, told Bloomberg: “While it has been widely reported that HNA has recently been exploring the sale of some of its assets, we are in a very strong place with our business and remain committed to our go-forward strategy.”
HNA Group acquired Carlson Hotels in 2016 and holds a stake of 70.4% in the former Rezidor Hotel Group. In 2017 a global committee was created to oversee both companies.
HNA has been pulling back after a spate of deals, most-recently selling its 26.5% stake in NH Hotels Group. Minor International acquired the 25.2% stake from HNA Group in a two-tranche transaction valued at EUR619m.
HNA Group has also now sold its shares in Hilton, Park Resorts & Hotels and Hilton Grand Vacations and could also look to exit other investments which are no longer allowed by China’s government, which would include its minority stake in Red Lion Hotels, bought in 2015.
March this year saw Carlson Rezidor Hotel Group announced its rebranding to Radisson Hotel Group. Rezidor Hotel Group will become Radisson Hospitality in April, subject to the approval of shareholders. The group said it planned to become “a top three hospitality company in the world”.
Federico González, president & CEO, told delegates at the International Hotel Investment Forum in Berlin: “The mission that we have created is completely compelling. Being one of the top three doesn’t mean that you are the largest, but we have the conviction that we can do much better than the competitors. It is about the quality of work we do.
“The five-year plan is fully focused on organic growth. In the coming years we will increase our capabilities in a way that we can integrate anything that may come into the company. We need to be very focused and get ready if the opportunity comes.”
The group used the IHIF to launch Radisson Collection, which it described as “a premium collection of exceptional hotels in landmark locations, driven by consumer demand for individuality and more personalised experiences”. The 15 hotels which have previously been branded under the Quorvus label will be included in the new collection. The launch took the number of brands using the Radisson name up to four, including Radisson Red.
HNA’s sell off has extended beyond hotels, with speculation linking HNA Group to the sale of a portfolio of properties in China valued at USD2.2bn. In Australia Virgin Australia scrap plans to potentially go private, raising concerns that HNA Tourism, which holds 20% of the group, might be looking to exit.“Following discussions with the major shareholders the board has decided not to privatise the company,” said chairwoman Elizabeth Bryan.
In April HNA Group cut its stake in Deutsche Bank from 8.8% to 7.9%, commenting that it was committed to remaining a major shareholder at the lender.
Reports have suggested that HNA Group is suffering from liquidity issues, after spending close to USD50bn over two years. A bond offering from HNA Group International Company, its offshore funding arm, at the end of 2017 saw it pay 9% for a one-year loan. The unit also pledged a EUR21m stake in NH to back a short-term loan. At the end of last year S&P warn that HNA’s funding costs were “meaningfully higher” than a year ago, causing it to cut the company’s group credit profile.
At the beginning of this year Goldman Sachs said that the HNA group had “strong cash generating assets”, but warned over debt and cash flow mismatches among some of the subsidiaries. The group had 16 subsidiaries at the last count and last year responded to accusations that its organisation was opaque, disclosing that two charities owned 52% of the conglomerate, with 12 of its executives holding most of the rest.
November saw Xin Di removed as chairman and CEO of HNA Tourism Group, in what the company called a “normal personnel adjustment”.
HA Perspective [by Katherine Doggrell]: Just when you thought that Radisson Hotel Group and Radisson Hospitality had strapped on their five-year plans and were ready for a bright new future, complete with a renewed interest in leases, their owner realised that actually they couldn’t afford them after all and they had to give them back. Just when they’d got used to their new names.
But away from the image of rescue dogs and their disappointed faces – the former Rezidor, in particular, was no unwanted hound – who will take this pair in? The answer could be any number of parties, notably the operators themselves.
Like the Littlest Hobo, the former Rezidor built up strong positions in the emerging markets, in particular in Africa and Russia. And it is reasonably priced. The company’s market capitalisation at the time of writing was just under EUR500m. When HNA was building its stake the expectation was that it would be rolled in with NH Hotels. With Minor now creating a leading position at NH, could it extend that north?
Eyes are of course on AccorHotels and when asked last year by this correspondent, CEO Sébastien Bazin confirmed that (of course) the group had cast its eye in Rezidor’s direction. At the time of writing AccorHotels signed an agreement with 15 banks to provide a USD1.2bn revolving credit facility, replacing its existing one. So it has the cash.
The former Carlson Hotels was not heavy on assets and is likely to be advantageously priced, the more so given HNA’s eagerness to exit. A readymade global package which many had thought tied up for the next few years at least is back on the market. Would IHG pick up the ‘phone?
Additional comment [by Andrew Sangster]: The HNA story has not been a happy one, not the least for co-chairman and co-founder Wang Jian who fell to his death in France in early July. Wang was regarded as being a key driver in the USD40bn acquisition spree of HNA and held a stake in the company of just under 15%.
The company is now selling off its overseas assets almost as fast as it bought them. So far this year, USD15bn worth have been divested. In the hotel space, the sale of the holding in Hilton and NH has been well flagged and it looked an improbable long-term holder of Carlson and the former Rezidor.
The focus of Adam Tan, CEO of HNA, has shifted from proving to Westerners that the company is separate from the Chinese government to proving to the Chinese government that it is a loyal servant.
To these ends, stakes in Western hotel companies are not compatible with what the Chinese authorities are seeking from overseas investment. The company is probably on safer ground with its 10% stake in Pierre & Vacances that is seeing it build holiday homes in China on five sites.
For Carlson and Rezidor, it looks like there will be a few more months of uncertainty until they find new owners. Luckily for HNA, it is a great time to be conducting a fire sale and it should be able to get fair value.
There must be some doubt, however, that it will recoup what it spent buying the portfolio. When it sold its Hilton stake, HNA was estimated to have made USD2bn in profits, a return of more than 60%, according to the Wall Street Journal. But Carlson in particular looks a trickier sale, particularly for its North American assets.
Rezidor is much more appealing as is Carlson’s strength in Asia, notably India where it is one of the biggest hoteliers, alongside the Taj group and Marriott. This is a great opportunity for IHG to flex its cheque book and for new CEO Keith Barr to make his mark.