Park Hotels & Resorts Inc is "in discussions" with major shareholder HNA Group Co. Ltd. regarding the Chinese conglomerate's desire to sell shares in the hotel real estate investment trust, Chairman, President and CEO Thomas Baltimore Jr. said.
HNA said in a filing that it plans a full or partial sale of its roughly 25.0% stake in Park Hotels — more than 53 million shares — which it owns through HNA Tourism Group Co. Ltd. After a global buying spree in recent years, HNA has been seeking to sell some of its assets to pay down debt. It also owns a roughly 15.8% share in Red Lion Hotels Corp., which it has signaled its intent to sell, and a roughly 26.1% stake in Hilton Worldwide Holdings Inc., the world's second-largest hotel operator.
Park Hotels was formed when Hilton spun off hotels it owned into a separate publicly traded company in January 2017.
On an earnings conference call, Evercore ISI analyst Rich Hightower asked Baltimore whether Park, which is considering share repurchases using proceeds from recent asset sales, is able to buy its own shares directly from HNA.
"I will note for those on the call that, yes, HNA requested an early registration, and we are presently in discussions with them," Baltimore said. "Obviously, a registered public offering requires the participation of Park, and we will have no further comment or color to add on this subject at this time."
Moments later, another analyst asked Baltimore to clarify whether HNA needs Park's permission to sell its shares, or whether it can conduct such a sale without the REIT's approval.
"We tried to address it up front," Baltimore said. "I think the statement is pretty clear, and I think [it] addresses your question."
In a March 2 note published before the call, Hightower wrote that, according to Park's recent annual report, HNA will not have customary registration rights for its Park shares until two years after it purchased them, on March 15, 2017. Even so, he noted, the same filing said that the stockholder agreement "does not generally restrict transfers of shares by HNA, except that if HNA transfers any of its shares to any HNA affiliate, such HNA affiliate must agree to be bound by the terms of the HNA stockholders agreement."
"We are not legal analysts, but a plain English interpretation here appears to be consistent with the view that HNA can sell its shares at any time, to any party, in what are effectively 'private' transactions, subject (at a minimum) to the 4.9% ownership limit stipulated within [Park's] charter," Hightower wrote, adding that investors should anticipate "possibly a number of such 'stealth' secondary transactions going forward."
