NH’s Minority Shareholders Fear HNA Will Take Control

19 May 2015 – Expansión

Intesa’s exit from the share capital increases HNA and Hesperia’s control over NH – six of the hotel chain’s eleven directors are representives of the two largest stakeholders.

The funds and minority shareholders of the NH Hotel Group have expressed their concern following a decision by the Board of Directors not to appoint any more independent directors and therefore increase, albeit indirectly, the control exerted by the Chinese giant HNA and the Hesperia Investor Group – the two largest shareholders.

At the end of January, Intesa Sanpaolo put an end to its eight year investment in NH by selling its 7.6% stake. At the time, the Italian entity had just one director (Livio Giovanni Maria Torio) since its other representative (Rosalba Casiraghi) resigned in December 2014; her exit left NH without any female directors and granted HNA its fourth executive.

Following Intesa’s divestment, NH’s Board of Directors decreased from 13 to 11 members. And so it will remain for the time being. Last week, the management body approved the accounts for the first quarter. It also referred the appointment of Francisco Román and Ling Zhang (appointed by co-optation) and the re-election of José Antonio Castro and José María López-Elola (following the expiry of their mandates) for approval by the General Shareholders’ Meeting, which will be held in June. There was no mention of (the appointment of any) more independent directors, which has aroused concern amongst NH’s fund managers and minority shareholders, since the hotel chain’s corporate bylaws provide for a maximum of 20 directors and a minimum of five.

Over the last few years, funds such as THS, BlackRock, Fidelity and Invesco have all acquired shares in NH, although in most cases, their stakes, which fluctuate constantly, are currently trading at below 3%. Currently, four of the eleven directors represent HNA and Hesperia has two directors, even though it has reduced its stake by 8.56% to 9.09%.

Corporate governance

The counterweight are three independent directors, together with the CEO, Federico González and the Chairman, Rodrigo Echenique, who represents Santander and whose exit from NH is expected in the medium term. The concern of the minority shareholders is that, as well as violating corporate governance standards, HNA, which owns a 29.5% stake, will strengthen its hold over NH without launching a public takeover bid (OPA) for the company. If the CNMV establishes that NHA and Hesperia control NH between them, it may compel them to launch a takeover bid for 100% of the share capital.

Original story: Expansión (by Y. Blanco)

Translation: Carmel Drake

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