Hilton files for IPO after six years of PE ownership

14 Sep 2013

After six years of private-equity ownership, Hilton Worldwide filed for an initial public offering yesterday to raise up to $1.25 billion.

The move had been expected after people familiar with the matter confirmed in August, that the McLean-based hotel chain had tapped four banks to take the company public, The Washington Post reported.

According to a filing with the Securities and Exchange Commission, the number of shares of the company's common stock to be offered and the price range were yet to be determined but equity giant Blackstone Group was expected to retain controlling interest in the hotel chain.

According to Hilton Worldwide, it would use the proceeds from the IPO to pay down its debt and for general purposes.

The first six months of 2013, Hilton saw a profit of $189 million on revenue of $4.6 billion, according to the filing and as of 30 June, 2013, the company had $15 billion in debt on its balance sheet.

The Washington Post  quoted Nikhil Bhalla, vice president of equity research at FBR Capital Markets in Arlington, as saying,  the timing was right for lodging companies to public right now. He added, a few years of sustained growth had already been seen and (the industry) was positioned for another several years of growth.

The move comes six years after Blackstone took the hotel company private with its record acquisition for $26 billion which included around $7 billion in debt.

According to The New York Times, the move was particularly well timed with the lodging industry on a major recovery uptick over the last few years. Blackstone had acquired Hilton in 2007 just before the markets took a turn.

At the time the $26-billion purchase looked like a mistake with the downturn hitting hard and real estate prices as well as consumer travel dropping.

The Blackstone deal was led by Jonathan Gray, who had led nearly all of the firm's hotel deals over the last 15 years. According to analysts, Gray's real estate unit was the biggest and most profitable business at Blackstone, and a successful Hilton IPO would only solidify his success at the firm.

After the takeover, Blackstone increased the number of open rooms by 34 per cent, or 170,000 rooms, the highest rate of any major hotel company, according to the firm.

Blackstone said in its filing there were more rooms on the way as the development pipeline had jumped by 52 per cent to an industry-leading 176,000 rooms.