April 9, 2018 / 11:20 AM / 2 years ago

China's HNA to sell Hilton stake in secondary offering

(Reuters) - Hilton Worldwide Holdings Inc’s (HLT.N) main shareholder HNA Tourism Group will sell about 63 million shares of Hilton common stock in a secondary offering, making good on signals it would exit its stake in the U.S. hotel operator.

The sale is an attempt by HNA Tourism’s parent, Chinese aviation-to-financial services conglomerate HNA Group Co Ltd, to restructure its far-flung operations and raise cash by selling equity and prime real estate assets.

Its restructuring follows a $50 billion acquisition spree over the past two years, which has sparked scrutiny of the firm’s opaque ownership and use of leverage.

Hilton announced the stock offering on Monday, while also raising its forecast for first-quarter profit.

HNA Tourism held about 82.5 million shares in Hilton as of April 5.

HNA Group said last week it would sell some or all of the $6.3 billion stake in Hilton.

Hilton, which owns the Waldorf Astoria brand, raised its first-quarter adjusted earnings forecast to 52 to 54 cents per share from a previous range of 43 to 47 cents.

Hilton also lifted its forecast for revenue per available room (RevPAR), a key performance metric for the hotel industry, to 3.5 to 4 percent, from 1 to 3 percent.

Its stock rose as much as 2.6 percent on Monday morning.

The RevPAR forecast was stronger than expected, said Morgan Stanley analyst Thomas Allen, adding it was likely supported by continued strength in foreign markets, particularly in the Asia Pacific region.

Hilton recorded the strongest growth in its international business from Asia Pacific in the fourth quarter, led by rising demand in China as travel picks up pace in the world’s second largest economy.

The company said on Monday underwriters will have a 30-day option to purchase up to an additional 9.4 million shares of its common stock from HNA.

FILE PHOTO - The logo of Hilton hotel is seen in Batumi, Georgia, May 2, 2016. REUTERS/David Mdzinarishvili/File Photo

Hilton has agreed to buy back from HNA 10 million shares of its common stock at a price equal to the one at which the underwriters will purchase shares from HNA, less 1 percent of the public offering price.

Hilton will have the option to repurchase from HNA up to an additional 6.5 million shares of its common stock at the same price.

The company will not receive any proceeds from the sale of shares in this offering, Hilton said.

Reporting by Ankit Ajmera in Bengaluru; Editing by Shounak Dasgupta, Patrick Graham and Sai Sachin Ravikumar

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