Hilton Hotels Set For $2.4 Billion IPO, In Massive Private Equity-Backed Launch

 @natrudy
on December 11 2013 8:34 AM
  • Hilton Sri Lanka 2013 Shutterstock
    Hilton Sri Lanka. Shutterstock.com
  • Las Vegas Hilton hotel and casino, shown in this July 12, 2000 photo
    Las Vegas Hilton hotel and casino, July 12, 2000. REUTERS/Steve Marcus
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Reflecting strong demand from investors, Hilton Worldwide Holdings Inc., the world’s largest hotel operator, moved its initial public offering up to Wednesday as it seeks to raise as much as $2.4 billion after the markets close.

The McLean, Va., company and its existing shareholders plan to sell as many as 112 million shares at $18 to $21 apiece. Initially, investors thought the company would start trading Friday on the New York Stock Exchange under the ticker HLT.

If Hilton sold at the midpoint of $19.50 per share, the hotel operator could be valued at about $31.7 billion after the IPO by one measure, according to Bloomberg. That premium valuation would be relative to rivals like Marriott International Inc. (NASDAQ:MAR) and Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT).

Several banks including Goldman Sachs Group Inc. (NYSE:GS) and Deutsche Bank AG (USA) (NYSE:DB) are joint bookrunners on the deal, according to IPO intelligence firm Renaissance Capital.

Hilton’s IPO would be the biggest hotel launch on record, and the second-biggest U.S. IPO this year, if it raises its potential maximum of $2.7 billion, at the high end of its proposed share-price range. That’s more than Twitter Inc.’s (NYSE:TWTR) $1.8 billion IPO.

The launch would also count as one of the private equity industry’s most profitable deals, Bloomberg reports. New York-based Blackstone Group LP (NYSE:BX), which bought Hilton in 2007 for $26 billion, stands to make a paper profit of about $8 billion. That would be second only to the $10.1 billion profit made by Apollo Global Management LLC (NYSE:APO) from its 2008 investment in chemical maker LyondellBasell Industries NV (NYSE:LYB).

The strong interest in Hilton's IPO roadshow is seen as a positive sign that lodging and capital markets are recovering from the credit crisis. Hilton’s sale could be five times oversubscribed, according to sources cited by Bloomberg. The company reported a profit of $352 million in 2012, up 39 percent from a year earlier, on revenue of $9.3 billion.

Blackstone isn't selling its Hilton shares in the IPO, but its stake will increase in value after the deal. If the IPO shares sell around $19.50, Blackstone would have about a 76.2 percent stake in Hilton, roughly valued at $14.6 billion. Blackstone CEO Stephen Schwarzman has said he intends to remain a Hilton shareholder for several years.

Analysts have lauded Blackstone’s turnaround of Hilton's operations and management, pointing out that Blackstone timed the public launch well, especially given a bullish U.S. stock market.

Ian Weissman, managing director at International Strategy & Investment Group LLC, which doesn't own a stake in Hilton, told Bloomberg: “It’s a good time to be issuing stock for hotel companies. We’re in a sweet spot of the hotel cycle.”

 

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(Note: Photo by Shutterstock.com.)
 

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