Hilton IPO raises $2.34 bn

12 Dec 2013


Hilton Worldwide Holdings Inc, the luxury hotels chain bought by private equity firm Blackstone Group LP in 2007, yesterday raised $2.34 billion in its initial public offering, making it the biggest floatation by a hotel company.

The McLean, Virginia-based hotel operator, priced its shares at $20, valuing the world's largest hotel operator at $19.7 billion.

Hilton and existing shareholders sold 117.6 million shares in the IPO, and the hotel chain plans to use the proceeds to help repay $1.25 billion debt.

Hilton will begin trading today on the New York Stock Exchange under the ticker symbol "HLT."

Blackstone had acquired Hilton just before the global financial crisis in 2007 for $26.9-billion in cash, including assumption of debt of about $7.5 billion (See: Blackstone acquires Hilton Hotels for $26 billion).

The acquisition was the largest purchase of a hotel chain by a private equity firm and Blackstone's biggest investment in a single property to date.

Since the deal was struck on the eve of the global financial crisis, many analysts had then opined that Blackstone might not get a return on its investment.

Blackstone's funds and co-investors had invested about $5.6 billion through equity and had borrowed $20 billion from a consortium of seven banks to fund the acquisition.

The acquisition had come two years after Hilton Hotels Corporation merged its sister company in the UK with Hilton International, in a $6-billion deal that split off UK bookmaker Ladbrokes into a stand-alone company.

But, barely six months into the acquisition the global hotel industry went into a downward spin reeling first from the global financial crisis and later from the recession.

Blackstone is reported to have at one point, recorded a paper loss of two-thirds of its $5.6 billion equity investment in the hotel chain.

In February 2010, Blackstone reached a deal with lenders to restructure Hilton's debt by several billion dollars.

Post recession, Hilton, like other hotel chains, have flourished, and reported a net income of $352 million in 2012 on of $9.28 billion.

When Conrad Hilton opened the first hotel to bear the Hilton name in 1925, he aimed to operate the best hotel in Texas, but today Hilton operates 10 brands in 90 countries with 4,000 hotels having a total of 650,000 rooms.

With over 4,000 properties, Hilton had refinanced about $13 billion of debt, capitalising on US stock prices at near record levels and a rebound in hotel occupancies and rates (See: Blackstone plans $13 bn debt refinancing for )Hilton Worldwide ahead of IPO).http://www.domain-b.com/industry/Hotels/20130808_blackstone.html

In August, New York-based Blackstone had appointed Deutsche Bank, Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley as the main underwriters for the IPO, all of whom are expected to refinance Hilton's $15.1 billion debt prior to the offering.

The past six years have seen Hilton chief executive officer Christopher Nassetta increase the number of rooms by 34 per cent, most of them overseas and in franchised and managed hotels, which required almost no capital investment.

The offering came as the IPO market heats up and the hotel industry starting to recover over the past two years from its mauling during the recession. Roughly 200 companies had gone public in 2013 with markets hitting record highs.


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