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HNA calls off €431.6m deal with NH Hoteles
December 13 2011

The deal, signed in May, would have had China-based tourism and airline company HNA acquire a 20% stake in Spanish chain NH Hoteles.

  • HNA Group called off its €431.6-million (then US$594-million) deal with NH Hoteles, citing economic uncertainty.
  • NH Hoteles received US$15 million in compensation from HNA in accordance with the terms and conditions set forth in the investment agreement.
  • The Spanish chain has to refinance some €600 million (approximately US$791 million) during 2012.

MADRID—HNA Group has pulled out of its previously agreed upon deal with Spanish hotel chain NH Hoteles because of economic volatility.

The deal, which was signed in May 2011 and subject to mandatory approvals from the Chinese government, would have had the China-based tourism and airline group acquire a 20% holding in NH Hoteles totaling €431.6 million (then US$594 million), including a capital increase at a price of  €7 per share (then US$9.87 per share).

The agreement also would have allowed for the two groups to pursue a joint venture for managing hotels in China.

But as macroeconomic uncertainty continued to plague the euro zone throughout the year, HNA showed signs of hesitation. The group during October changed the conditions of the deal, cutting the share price of a capital increase to €5.35 per share. HNA cited the drop in NH Hoteles' share price as the reason behind the change of terms, reported.

And as things continued to worsen, HNA decided not to complete the execution of the investment agreement, according to a news release.

Representatives from HNA Group and NH Hoteles did not respond to enquiries before press time Tuesday morning.

Upset in the capital markets has waylaid several global hotel transactions this year.

HNA has confirmed its willingness to continue the negotiations with NH Hoteles, according to the release.

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NH Hoteles received approximately €11.4 million (US$15 million) in compensation from HNA in accordance with the terms and conditions set forth in the investment agreement, according to the release.

The Spanish chain has to refinance some €600 million (approximately US$791 million) during 2012, which Banesto Bolsa analysts said might now prove difficult, forcing the company to hike capital, Reuters reported.

"The news (on the deal with HNA) is negative for NH Hoteles which was banking on the funds to help refinance its debt," the analysts said in a research note.

There is now an increased possibility the hotel chain will have to raise capital to meet its funding needs next year, Banesto Bolsa said.

NH Hoteles operates 400 hotels comprising approximately 60,000 rooms in 25 countries (36% of the rooms portfolio is located in Spain; 18% in Germany; 14% in Italy; and 11% in the Netherlands among others).

Spain’s hotel industry has shown moderate growth through October of this year, according to STR Global, sister company of The country posted a 6.1% occupancy increase, a 1.2% increase in average daily rate, and a 7.3% increase in revenue per available room, when measured in euros.

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