What's going on?

A Chinese company has bought a 25% stake in America�s iconic Hilton hotel group for $6.5 billion. It�s the latest example of Chinese companies making big investments outside of China.

What does this mean?

This is the most recent development in Hilton�s ownership history. Blackstone, one of America�s biggest investment firms, bought 100% of Hilton in 2006. Since 2013, it has been selling out of its stake as a way to, effectively, crystallize profit on its investment. The Chinese company, HNA Group, is now buying part of Blackstone�s stake in Hilton, which will leave Blackstone with only a 21% ownership. So, in a way, this deal doesn�t involve Hilton at all � it�s a transfer of ownership between two non-Hilton entities.

Why should I care?

For the stock: It�s a vote of confidence for Hilton�s stock.
HNA�s purchase price was 14% higher than the price at which the stock closed on Friday. The fact that it was prepared to pay a premium suggests that it felt Hilton’s stock was undervalued (while it�s normal for a buyer to pay a premium when gaining control of a company, it�s less common for a premium to be paid for a minority stake). Initially, Hilton�s stock jumped 7% – although it sold off as the day went on (perhaps as investors remembered that Blackstone still has 21% of the company to sell�).


The bigger picture: This continues a massive trend of Chinese firms buying overseas companies.

Chinese firms have already spent $181 billion buying non-Chinese companies this year (tweet this): that�s 70% more than they spent in all of last year. Part of the rationale likely involves moving money out of China, where the value of its currency continues to fall significantly. But there�s also a specific investment logic for tourism-related deals: Chinese people, as their wealth increases, are likely to travel abroad more and Chinese firms want to be there to benefit from it.