Experts warn Chinese firms to be cautious in expanding abroad
A division of China's HNA Group has agreed to buy Carlson Hotels Inc, the owner of the Radisson hotel chain, which experts said represents a continuation of overseas expansion by Chinese companies.
HNA Tourism Group Co, a unit of domestic aviation and shipping giant HNA Group, will acquire 100 percent of Carlson Hotels, including its approximately 51.3 percent majority stake in Rezidor Hotel Group AB, according to a press release HNA sent to the Global Times Thursday.
Financial terms were not disclosed.
The deal is subject to regulatory approvals and is expected to close in the second half of 2016, HNA said.
HNA has "great respect" for the Carlson family and a deep appreciation for its history and special culture, and the combination aims to establish HNA's presence in the US market and expand its footprint in hospitality internationally, Bai Haibo, chairman and CEO of HNA Hospitality Group, was quoted as saying in the press release.
"HNA Tourism Group itself has an extensive presence in tourism and hospitality, so an acquisition [like the one involving Carlson Hospitality] could greatly benefit its own business," Wang Danqing, partner at Beijing-based consultancy ACG, told the Global Times Thursday.
Carlson Hotels has 1,400 properties in operation or under development in 115 countries and regions.
Chinese buyers have been active in overseas deals in the past two years.
On April 19, another HNA unit, HNA International Investment, acquired a commercial building project at London's Canary Wharf for 131 million pounds ($191 million).
Wang noted that it is only natural to see a boom in overseas acquisitions by Chinese companies as they grow.
"Plus, overseas property assets make a good investment target for big international companies that want to optimize their asset portfolios," he said.
Overseas property investment by Chinese companies rose 41.5 percent year-on-year to a record $21.37 billion in 2015, domestic financial news portal winshang.com said in April, citing an industry report.
The increasing number of Chinese outbound visitors is a key factor driving domestic companies to go global and buy property assets, Wang Jun, deputy director of the Department of Information at the China Center for International Economic Exchanges, told the Global Times Thursday.
"When I traveled to New York earlier this month, I noticed that the Waldorf Astoria Hotel, which was acquired by China's Anbang Insurance Group last year, attracted many Chinese visitors," said Wang.
He noted that the varied demand of Chinese travelers pushes Chinese companies to focus on the global hotel industry.
Domestic companies will continue to increase investment in overseas hotel assets, he said, noting that "the investment will mainly go to famous cities that Chinese travelers like to visit."
Although Chinese companies are making more foreign acquisitions, they also need to be cautious, said experts.
China's leading real estate developer Dalian Wanda Group bought the landmark Edificio Espa?a building in Madrid, Spain in 2014. Dalian Wanda planned to demolish the building and reconstruct it, but that was opposed by local residents on the grounds that the demolition would erode the historical value of the building.
Due to the setbacks, Dalian Wanda has begun to evaluate selling the building, the Xinhua News Agency reported Thursday, citing company insiders.
"Chinese firms should not only pay attention to asset prices when making overseas acquisitions. Local culture as well as the social environment should be studied seriously to avoid the kind of problems encountered by Wanda," Wang with ACG noted.
Chinese companies have just recently begun to make global acquisitions, so they need to learn about local rules and laws, noted Wang, the deputy director.
"Chinese firms should also know how to manage and operate the business in a sustainable way after they conclude a deal," he said.
