China's HNA Group considers future following co-founder's death

Hesperia Sabinal, part of NH Hotels. Photo credit: NH Hotels

China's HNA Group has been in a state of flux for months as it works on restructuring its holdings, but the company now faces a complicated future after the death of its co-founder and co-chairman. While on a business trip to Provence, France, Wang Jian fell to his death earlier this week in what police are calling an accident.

HNA Group’s board and management team, led by co-founder and chairman Chen Feng and CEO Adam Tan, issued the following statement:

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“HNA Group extends deepest condolences to Mr. Wang's family and many friends. Together, we mourn the loss of an exceptionally gifted leader and role model, whose vision and values will continue to be a beacon for all who had the good fortune to know him, as well as for the many others whose lives he touched through his work and philanthropy.”

Divestment

HNA built an empire worth an estimated $230 billion in assets on a foreign buying spree that saw it diversify into tourism and hospitality via major deals to buy shares in companies including Hilton and international airlines such as Virgin Australia, France’s Aigle Azur and TAP in Portugal.

But the company, like other Chinese conglomerates, came under pressure last year as Beijing cracked down on the risky debt-fueled financing that enabled its expansion, tightening lending controls and reining in debt. In response, HNA began selling off some of its assets.

In April, HNA announced that it would sell at least some of its $6.5-billion stake in Hilton Worldwide Holdings and sold a $1-billion stake in the Hilton Grand Vacations timeshare company.

Last month, Asia's Minor International, a global conglomerate focused on restaurants, hospitality and lifestyle brands distribution, reached an agreement with HNA to purchase an equity stake of 25.2 percent in Spain's NH Hotel Group in a transaction valued at €619 million. As we reported, HNA's divestiture of its NH Hotels stake was poised to calm down what was a conflagration after HNA acquired Carlson Rezidor Hotel Group, now Radisson Hotel Group, in 2016. It was a move that some shareholders saw as a conflict of interest since HNA, at the time, owned almost 30 percent of NH Hotels and Carlson was viewed as a direct competitor. Subsequently, London hedge fund Oceanwood Capital Management, which owned a 10-percent stake in NH Hotel Group, called for the chairman of NH Hotel Group to temporarily stand down until the company resolved any conflict of interest related to HNA's buy of Carlson Rezidor.

What’s Next for HNA

Wang’s death was seen as likely to complicate the offloading of its assets. “Wang’s passing will mark the end of an era of aggressive expansion by HNA Group,” Corrine Png, CEO of Asian transport equity research firm Crucial Perspective, told Bloomberg. “More importantly, it will also put HNA Group and related companies’ restructuring plans back on the drawing board. Some of the recent restructuring plans has resulted in HNA Group, and ultimately Hainan Province Cihang Foundation, increasing control over the subsidiary and associate companies, instead of decreasing control. This may not sit well with the government.”

Liu Feng, director of the Hainan Normal University Free Trade Port Research Center, told Bloomberg that the loss would bring “short-term shocks” to HNA’s business development, especially to the group’s ongoing business integration plan. “The long-term impact on the group will be limited. The key is to figure out more details of what happened in France, before we can have a deeper analysis on the potential impact on HNA.”

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