Asia conglomerate Minor International set for NH Hotel Group takeover

HNA Group has drawn the interest of potential bidders, including Elliott Management and Apollo Global Management, to take over its stake in Spanish hotel company NH Hotel Group.
The NH Collection Madrid Eurobuilding. Photo credit: NH Hotels

Barceló Hotel Group's quest to become Spain's largest hotel group appears to have been foiled. That's because Asia's Minor International, a global conglomerate focused on restaurants, hospitality and lifestyle brands distribution, has reportedly reached an agreement with HNA Group to purchase an equity stake of 25.2 percent in Spain's NH Hotel Group in a transaction valued at €619 million.

In January, Barceló made a €3 billion unsolicited bid for NH that was ultimately turned down. A merger between the two groups would have created Spain's largest hotel company at 478 properties with a combined total of 89,000 rooms. 

Minor, whose hotel subsidiary Minor Hotels has five brands, including Anantara, Avani and Tivoli, had already owned 9.5 percent in NH Hotel Group. With its stake in NH increasing over 30 percent, under Spanish law, it is obligated to launch a takeover bid of the company. As stated: "A person (individual, corporation or entity) is considered to have control of a company, either individually or jointly with those persons with whom it is acting in concert, where it comes to hold, directly or indirectly, a percentage of voting rights in its share capital of 30 percent or more."

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Minor can now move to acquire the remaining shares in NH in an all-cash public tender offer. Such an offer would be at a price not lower than Minor International's highest acquisition price in the last 12 month-period, currently €6.40 per share. Minor targets its shareholding in NH Hotel Group at around 51 percent-55 percent and says it intends to keep NH Hotel Group as a publicly-listed company on the Madrid Stock Exchange. 

A bid for NH Hotels values the company at around €2.5 billion,
 
"We are embarking on a new era, driving investment strategy to further cement our footprint in the European hospitality industry," said Dillip Rajakarier, CEO of Minor Hotels. “We will be able to create a network of over 540 hotels with a reach across Asia, Oceania, the Middle East, Africa and Europe, all of which are important hospitality regions around the world. The business network will allow the two companies to capitalize on our leadership positions in key growth areas, highly complementary asset and brand portfolio, technology platform and talented employees. Minor can also support the NH Hotel Group with its food and beverage expertise where appropriate to enhance customer experience and maximize revenue potentials. Together, we will be well-positioned to achieve greater success, provide greater value to customers and create more exciting growth opportunities than either company could achieve alone.”
 
The share purchase from HNA Group will be in two tranches. The first tranche of 65.85 million shares, representing 16.8 percent shareholding on a fully-diluted basis, will be completed on or around June 15, 2018. The second tranche, consisting of 32.94 million shares or 8.4 percent on a fully-diluted basis, is expected to be completed in September 2018.

HNA has rapidly been decoupling from investments due to a crippling debt load and Chinese governments edict to curb foreign investments. 

Minor International winning out is a victory for the group, which bested a host of bidders that included Elliott Management and Apollo Global Management and as recent as five days ago, Barcelo.

The acquisition is a shot in the arm for Minor Hotels, whose current portfolio of 161 hotels will now more than triple with NH's 382 hotels (59,350 rooms) in Europe, the Americas, and Africa. 

HNA's divesture of its NH Hotels stake could prove to tamp down what was a conflagration after HNA acquired Carlson 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.

It was Oceanwood's 9.5-percent stake that Minor acquired last month.

Oceanwood had noted that the Carlson deal could influence the directors representing HNA when assessing decisions such as hotels to sell from NH’s portfolio or expansion through new hotels, or a potential merger between NH and Carlson.