HNA Group is exiting its investment with Hilton earlier than anticipated, and for a big return.
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The Chinese conglomerate has announced plans to sell its stake in Hilton Worldwide Holdings Inc., thus ending its relationship with the international hotel chain, MarketWatch reports. When the company purchased a 25% stake in the hotel chain from Blackstone Group in March 2017, it promised not to sell for at least two years. The open-market sale is expected to return $6B.
After HNA's purchase of Hilton, the company split into three separate entities, with HNA owning 25% of each — Hilton Worldwide, Hilton Grand Vacations Inc. and Park Hotels & Resorts Inc. In March, HNA sold its shares in the latter two companies for $2.4B, bringing its total return to $8.4B, after buying the stake for $6.5B.
Though Hilton's stocks have performed incredibly well in the past year, HNA is under pressure to sell assets to both pay down part of its $100B in debt and to decrease its overseas holdings at the direction of the Chinese government. It has offloaded its Hilton stake early to crystallize its strong returns in order to fund other acquisitions, according to the Wall Street Journal.
HNA funded its initial purchase with $3B of its own funding and what ended up being $3.5B in debt. After accounting for the repayment of its debt, the conglomerate figures to net $4.9B from all three sales, or a 60% return after one year. It has been paying the interest on its debt using dividends, according to MarketWatch.
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