HNA Group will become a strategic shareholder of NH Hoteles by subscribing to a 20% increase in the capital amounting €431.6M at a price of €7 per share. HNA will have two members on the Company’s Board of Directors.
HNA Group and NH Hoteles will pursue forming a joint venture for managing hotels in China which will enable NH Hoteles to enter one of the largest markets in the world, in partnership alongside a major local partner in the Chinese tourism industry.
HNA Group, 6th company in the “China Top 500 Private Companies´ Ranking” by ACFIC(1), is a large enterprise group which operates in the following sectors: airline travel, logistics, financial services, tourism, real estate (including hotels), retailing, and airport management. In 2010, the Group achieved revenues of €7.0 billion, currently owns €40 billion in assets with more than 80,000 employees.
At its meeting, the Board of Directors of NH Hoteles decided to recommend the entrance of HNA Group as a new shareholder of the Company. The Chinese group will acquire a 20% holding in NH Hoteles and will have two members on the Company’s Board of Directors. The transaction, totalling €431.6M, involves making a capital increase, excluding the right of first refusal, at a price of €7 per share, which represents a significant premium to the current market price and to the average share price for the last quarter. HNA Group will thus become the second largest shareholder in the Spanish company. The agreement is subject to approval by the Chinese regulatory authorities and that two directors of HNA Group become members of the NH Hoteles Board of Directors.
NH Hoteles becomes a key player of the international hotel industry
HNA Group and NH Hoteles will also contemplate setting up a hotel management company in China to carry on the four-star hotel sector, which is where NH Hoteles focuses its strategic business. The joint venture complements NH Hoteles’ current strategy of growing using low-risk strategies, such as management of third-party owned hotels. Moreover, it helps the hotel chain to enter one of the fastest growing markets in the world, working in partnership with a local group that is a major player in the Chinese market.
The agreement envisages bringing into a new joint venture the management of several existing HNA hotels that fit the NH Hoteles brand image and segment. The joint venture will benefit from the management, loyalty and booking systems of NH Hoteles, and use the NH Hoteles brand name in China and would be supported by the knowledge and ability to gain local access of HNA Group in identifying the best locations for hotels, local management teams and general logistics of the group in the Chinese market.
NH Hoteles´ Chairman, Mariano Pérez Claver, said: “I would like to emphasise the great commercial value, which strengthens the balance sheet of the group and at the same time stands for a far-reaching strategic step for NH Hoteles. The alliance we are now arranging means that our company will have the opportunity to enter a market which has huge potential, China, and where there is a clear opportunity available for NH, working with a major, dynamic, powerful, prestigious business group which will, furthermore, become a major shareholder of NH. As a result, NH Hoteles interests in China will be fully aligned with those of HNA”.
Adam Tan, Executive Director of HNA Group, said: “HNA Group is honoured to join with the NH Hoteles’ shareholders and board members to support NH Hoteles’ management team as they continue to grow their world-class company into a truly world-wide company by developing operations in what will be the largest hotel market in the world”.
By entering China, the Spanish hotel chain will in time be able to increase its turnover, diversify its revenues and benefit from the excellent opportunity involved in taking a major position in the 4-star hotel sector, as demand for business travel increases in the country. This demand is driven by higher disposable incomes and the Chinese Government’s policies aimed at boosting domestic consumption. According to the World Tourism Organisation, China will be the country in the world most visited by tourists by 2020. The large-scale process of urban concentration that has been taking place in China in recent years
More than sixty cities in China currently have populations of more than one million inhabitants compared to Europe with 35. According to the UNWTO, China will be the first tourist recipient in the world by 2020.
The operation could also include the signing of a commercial agreement between the two companies aimed at gaining benefits from potential synergies, as they are complementary in nature. The commercial agreement might thus give rise to opportunities for cross-selling between NH Hoteles and other business areas of HNA Group, such as its airlines and tour-operators. NH Hoteles could become the hotel company of choice of passengers on airlines owned by HNA Group. This alliance will make for a larger number of customers from Asia to be received by NH Hoteles and therefore a broader diversification of the type of users of the hotel chain, according to their countries of origin.