Some of the language in the sale of Carlson Hotels as it related to Rezidor was a tad hard to construe. We are here to make it all better. And away we go...
When China's HNA Tourism Group announced its plans to acquire all of Carlson Hotels last week, Carlson’s approximately 51.3-percent majority stake in Rezidor Hotel Group was included in the package. Rezidor is Carlson’s master licensee, with hotels in Europe, the Middle East and Africa.
But as the agreement noted, since the closing of the transaction would result in an indirect change of control in Rezidor, HNA Tourism Group must, under Swedish takeover rules, launch a mandatory public tender offer for the remaining 48.7 percent of Rezidor, within four weeks of the transaction closing if Carlson’s ownership in Rezidor is not sold down below 30 percent.
What This Means
These rules and processes are abstruse in the U.S., to be sure, but as Daniel Marre, a partner at Chicago-based law firm Perkins Coie explained, they are fairly standard for acquisitions in Europe.
“It’s a shareholder protection mechanism,” Marre said. In short, if a company, in this case Rezidor, changes ownership, shareholders have an option to leave. “You can sell your shares if you don’t want to be with the new owners,” Marre continued.
According to Swedish law, a mandatory offer must be made when an entity "acquires shares carrying 30 percent or more of the voting rights in the target company." Minority shareholders can be forced out, however, when the bidder owns more than 90 percent of the shares in the target.
While Rezidor’s corporate office is in Brussels, the company itself is listed in Stockholm, and, therefore, is required to follow Swedish rules. “It’s like a Delaware corporation having its headquarters in Chicago,” Marre said. “They may all be sitting in Illinois, but when it comes to corporate governance, they have to follow Delaware law.”
HNA, Marre said, must now make a decision. Once it buys Carlson—which comes with that 51.3-percent stake in Rezidor—they either must sell 20-odd percent of their stake down to below 30 percent on their own within a month of the closing, or offer to buy the shares of anyone who owns Rezidor stock and does not want to be affiliated with HNA. In short, they must either drastically reduce or increase their Rezidor stake.
For Rezidor, with respect to Carlson, Marre does not expect very much to change. “Carlson is a master licensee of Rezidor’s brands. That contract won’t change," he said. "If HNA ends up selling down Carlson’s interest in Rezidor, there will be new management of Rezidor—but I doubt they’ll abrogate the contract. If HNA goes down the tender offer road and acquires even more of Rezidor than Carlson owns, they will have much greater ability to determine what Rezidor does in the future.”
For its part, Rezidor claims to have “no further information regarding the transaction or HNA’s intentions with its holding in Rezidor following completion of the transaction or a possible offer to Rezidor’s other shareholders.” The company did, however, say in a statement that it “welcomes HNA as the new majority shareholder.”