Hilton Worldwide, McLean, Virginia, filed on Thursday for an initial public offering of up to US$1.25 billion.
The Blackstone Group, New York City, owns Hilton Worldwide and took the hotel management company private for US$26 billion in 2007. The number of shares to be offered and the price range for the proposed offering have not yet been determined, but the initial value of the IPO is estimated to be US$1.25 billion. According to the filing Blackstone will retain majority ownership.
Deutsche Bank, Goldman Sachs Group, Bank of America Corp. and Morgan Stanley are arranging the IPO. Neither Blackstone nor Hilton Worldwide are commenting on the filing.
Bloomberg reported that according to a person with knowledge of Blackstone’s plans, Hilton could be valued at US$30 billion. The IPO would be the largest for a hotel company and its value is boosted by Hilton Worldwide’s performance figures. In the filing Hilton reported a net income of US$352 million in 2012, an increase of 39% from the previous year.
“This is the right choice for Hilton because of the access to capital for growth as development accelerates, capital is a way to ‘win’ new management agreements and there is increasing capex spending and requirements. Blackstone’s intention to remain a large equity owner will be appealing to the markets, so will benefit pricing of the stock,” said Bjorn Hanson, Ph.D., divisional dean, Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management NYU School of Continuing and Professional Studies. “It will be most interesting to know the amount of the offering, which will likely be many multiples of the US$1.25 billion in the announcement. The timing is great because of the continued outlook for RevPAR growth the remain above the 3.1% long term average, so the sector and this company are attractive to investors, and Hilton is one of the strongest names in lodging.”
Turnaround
The Wall Street Journal reported that Hilton had struggled under the debt taken on as part of the Blackstone buyout, and that according to a person familiar with the matter, at one point Blackstone recorded a paper loss of roughly US$4 billion on the hotel company. Since then Hilton’s performance has improved along with the U.S. hotel market’s performance. Last month Hilton Worldwide reportedly hired four banks to restructure its US$13 billion debt ahead of the IPO.