Tag: conflict of interest

Chinese Conglomerate HNA Wants to Sell its Stake in NH Hotels

19 January 2018 – El Mundo

The largest shareholder of NH Hotels, the Chinese conglomerate HNA, is considering the possibility of divesting its stake in the Spanish hotel group. It has engaged the entities JPMorgan and Benedetto Gartland to identify possible buyers for its 29.3% participation in the Spanish hotel chain.

The Chinese investor group has submitted this information to the National Securities and Markets Commission (CNMV), explaining that it has engaged the aforementioned entities “to review its shareholding position in the NH Hotel Group”, which it holds through its company Tangla Spain, “which includes the identification of possible buyers for its stake”.

It was only a week ago that the Board of NH unanimously rejected the merger proposed by the Barceló group. This possible sale could be driven by the need for liquidity but the rejection decision may have precipitated the move by the Chinese firm.

The Chinese investor group had entered NH in 2013 with an initial participation of 20% through the subscription of a capital increase amounting to €234.28 million, which it increased to 29.5% in November 2015, after purchasing the 8.33% stake that the entity Intesa Sanpaolo held in the listed hotel chain.

Nevertheless, the disagreements arose shortly after its entry into the Spanish group’s share capital. The purchase of Carlson Rezidor, a rival of the Spanish hotel group in certain markets, resulted in the exclusion of the Chinese company from NH’s Board due to a conflict of interest. The letters confirming these disagreements were made public and the parties even came to a head in the courts.

HNA needs to obtain liquidity to pay off a debt that it took out in 2015, after carrying out several acquisitions worth USD 40 billion (€32.65 billion). And in December, it announced its intention to sell assets worth US 6 billion (€4.897 billion).

By the middle of November, the Asian conglomerate had sold 1.14% of its share capital in the Spanish hotel group, which meant divesting 4 million shares, whereby obtaining some liquidity.

Based on the current composition of NH’s shareholders, HNA is followed by the investment fund Oceanwood, with 12%, and the Hesperia Investor Group, with 9%.

Original story: El Mundo (by Silvia Fernández)

Translation: Carmel Drake

Meliá & the CIO Group Bury The Hatchet

22 August 2016 – Expansión

Meliá and Compañía de las Islas Occidentales (CIO) – the Canary Island-based family group that brings together tourism, industrial and service sector companies – have put an end to the legal battle that has been raging between them since 2008.

The hotel chain owned by the Escarrer family has reported in a statement that CIO has acquired all of the shares that Meliá still owned in that group’s companies. Specifically, the company chaired by Francisco Javier Zamorano has acquired 5.03% of Inversiones Hoteleras Playa del Duque from Melía, along with the 8.42% stake that the hotel chain owned in Inversiones Turísticas Casas Bellas.

Inversiones Hoteleras Playa del Duque is the owner of the Gran Hotel Bahía del Duque (pictured above). Meanwhile, Inversiones Turísticas Casas Bellas owns and manages 40 five-star luxury villas at a complex that also houses a spa, mini-golf course and other facilities in the Playa del Duque urbanisation, in the town of Adeje (Santa Cruz de Tenerife), according to recent information filed with the Commercial Registry.

The business relationship between the two groups began in 1993, when Melía was chosen to operate Gran Hotel Bahía del Duque. The problems first arose in 2008, when CIO pushed Meliá aside from the management of the property. CIO defended its decision on the basis that Melía had opened a hotel complex in the same tourist area, which competed directly with Gran Hotel Bahía del Duque, given that, in its opinion, that represented a “clear conflict of interests”.

Meanwhile, Meliá initiated arbitration proceedings, which concluded that the Mallorcan chain had not breached any exclusivity agreement and that, therefore, the decision (to remove Meliá as the hotel manager) was improper and Meliá should receive €1.29 million by way of compensation.

Following that ruling, the company chaired by Zamorano understood that CIO would be automatically entitled to repurchase the shares that Meliá still owned in its companies, and that the dividends received for those shares would be returned, and so, it decided to appeal to the courts. Now, eight years later, and following Meliá’s exit from the CIO companies, the groups have definitively buried the hatchet.

Original story: Expansión (by R.Arroyo)

Translation: Carmel Drake

War Between NH’s Presidents Over HNA’s Role On The Board

2 June 2016 – Cinco Días

The investment funds that hold share capital in NH and critics of the role played in the hotel chain by HNA’s Directors have obtained the support of a heavyweight: the co-President of the Hesperia Investor Group, José Antonio Castro, who is also the second largest shareholder with a 9.27% stake.

José Antonio Castro, representative of Hesperia and co-President of the hotel chain, has acknowledged in a letter to two of the investment funds that hold stakes in NH, namely Henderson and Taube, that “a clear conflict of interest exists in the company for our shareholder HNA, following its agreement to purchase Carlson Rezidor and in particular, for the Board member and co-President, Charles B. Mobus”.

In his letter, Castro noted that NH’s Board of Directors ruled on 10 May that the role played by Mobus as advisor to the purchase of Carlson Rezidor did not compromise his position as the co-President of NH. At that meeting, the hotel’s management body agreed to put the necessary mechanisms in place to analyse a possible conflict of interest with HNA’s representatives. “However, that committee has not been created yet”, he said.

Hesperia’s representative confirms that his position regarding Mobus has changed with respect to the view he held at the Board meeting on 10 May and he justifies that decision by explaining that the HNA representative had informed some of the company’s shareholders that he had been authorised by the Board to go ahead with the Carlson Rezidor transaction. “That is not true. He tried (to obtain approval), that part is true, but the Board was not in agreement”.

Castro also justifies his change of heart by explaining that Mobus informed shareholders “that the Board of Directors knew that he was acting as advisor to the transaction. But, that is not true. He never told them”, he states in the letter, in which he also confirms that Mobus’ role is to advise HNA in its plans for the hotel industry, which involves the consolidation of its subsidiaries, something that he acknowledges, according to Castro, in the letters sent to other shareholders about the integration of NH and Rezidor or between NH and Carlson.

The businessman also acknowledges that during the last 20 days, NH has had “poor corporate governance”. In this way, Castro thinks a new Board meeting should be convened to review the latest agreements reached with respect to HNA’s possible conflict of interest.

Original story: Cinco Días (by L. Salces)

Translation: Carmel Drake

NH’s Shareholders Will Analyse Removal Of HNA’s Directors

26 May 2016 – Expansión

Oceanwood Capital, the fund that owns a 10% stake in the NH Hotel Group, has submitted a letter to the hotel company requesting that it adds some new items to the agenda for the General Shareholders’ Meeting, to be held on 21 June. It is requesting the removal of the four directors appointed by HNA, the Chinese company that owns a 29.5% stake in NH, i.e. the group’s majority shareholder.

Oceanwood believes that there is a clear conflict of interest that prevents those directors from defending the rights of all of the shareholders, rather than just those of the investment group that they represent. At the same time, Oceanwood has proposed the appointment of four external directors, because they cannot be classified as independent given that they have not been proposed by the appointments committee.

The document, which was submitted by due legal process yesterday, the last day on which it was legally admissible, requests the removal from the Board of the current Co-Chairman of the company, Charles Mobus, as well as of Ling Zhang, Xianyi Mu and Haibo Bai. The justification for these removals lies in the conflict of interst that now exists due to the structural and permanent competition between NH and its shareholder HNA, after the latter reached an agreement with Carlson Rezidor, a hotel group that competes directly with NH in Germany, the Netherlands and Benelux – particularly in Berlin, Brussels and Amsterdam – . Oceanwood asks not only that the General Shareholders’ Meeting removes these directors, but also that HNA is prevented from exercising its right to proportional representation as a result of its shareholding, until the aforementioned conflict of interest is eliminated.

In its request for the removal of the directors, Oceanwood emphasises, amongst other things, that the Chairman advised HNA on its purchase of Carlson Rezidor and that during that process, the possibility was proposed of the Chinese group submitting a takeover bid for 100% of NH. Moreover, it indicates that the three Chinese directors rarely attend board meetings in person, and instead choose to channel their votes through Mobus.

Support

In parallel to these removals, the fund, which hopes to have the support of other institutional investors to reach the 40% threshold, proposes the appointment of four new directors: Paul Johnson, Fernando Lacadena, María Grecna and José María Cantero de Montes-Jovellar. All are reputable professionals in their respective areas of activity. Johnson has worked in the hotel sector for 30 years, where he has created a chain, Kew Green Hotels, which has more than 5,000 beds and was recently sold to HK CTS for GBP 400 million.

Lacadena currently serves as the CEO of Testa – which has now been integrated into the Socimi Merlin – and, for several years before that, was the Finance Director at Sacyr. Meanwhile, Grecna has been the CEO of Värde Partners Europe and, between 2011 and 2013, was the CEO of the company in Iberia, headquartered in Madrid.

Finally, Cantero is a marketing specialist, who used to work at Amena (Orange) and who has worked for Mutua Madrileña for the last eight years, where he has served as the Deputy CEO. Oceanwood currently has one director on NH’s Board, Alfredo Fernandez Agras, and it asks that the General Shareholders’ Meeting ratifies his appointment. It says that there is no need to re-elect him, as it wants to prevent HNA from requesting the revocation of his appointment on the day of the General Shareholders’ Meeting.

Original story: Expansión (by S. Arancibia)

Translation: Carmel Drake