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China's HNA adds US$6.5b Hilton stake to global property selloff

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HNA Group Co is seeking to sell some or all of its stake in Hilton Worldwide Holdings, part of a global asset purge by the debt-laden Chinese conglomerate.

[NEW YORK] HNA Group Co is seeking to sell some or all of its stake in Hilton Worldwide Holdings, part of a global asset purge by the debt-laden Chinese conglomerate.

HNA disclosed its intention to sell the hotel company shares in a regulatory filing Thursday. The firm owns 26 per cent of Hilton's stock, or 82.5 million shares with a market value of about US$6.5 billion. It has already disposed of its stakes in two of the hotel operator's spinoffs. Hilton shares rose 1.3 per cent to close at US$79.04 in New York.

"The fact that we're not seeing a significant pullback with this announcement suggests that investors not only anticipated it, but are supportive of the overhang being removed, much like ripping a band-aid off quickly," said JT Deignan, head of real estate equity capital markets at Mizuho Securities USA LLC.

Hilton spokesman Meg Ryan declined to comment because the filing was from HNA, not the hotel group.

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HNA has been under pressure to reverse a multibillion-dollar buying spree since the Chinese government last year started to crack down on overseas dealmaking. The firm has since reduced its stake in Deutsche Bank and sold properties in New York, London, Sydney and Hong Kong. HNA owns about US$14.6 billion of real estate globally, according to an estimate by Real Capital Analytics Inc.

HNA paid US$6.5 billion in 2017 to acquire from Blackstone Group shares of Hilton Worldwide, which had recently spun off two of its businesses. Last month, HNA sold its 25 per cent interest in those two groups, Hilton Grand Vacations and Park Hotels & Resorts, for a combined US$2.34 billion. If it's able to sell its Hilton Worldwide stake at current prices, the conglomerate stands to make a paper profit that's just shy of US$2.35 billion.

With the two Hilton spinoffs, HNA found a way to amend restrictions that kept the stock tied up until next year, leading to speculation that a similar allowance could be made for HNA's stake in Hilton Worldwide.

Hilton executives have repeatedly said in interviews and in calls with investors that its agreement with HNA contains protections for shareholders.

Hilton's "independent board directors need to agree that HNA can get out of the lockup early", said Amanda Sweitzer, an analyst with Robert W Baird & Co.

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