Blackstone Books $1.25 Billion IPO For Hilton Hotels

Hilton Worldwide Inc filed for an initial public offering of up to $1.25 billion as owner Blackstone Group LP seeks to take advantage of a reviving hotel industry.

Blackstone took Hilton private in 2007 in a $26.7 billion deal, one of the largest leveraged buyouts that preceded the 2008 global financial crisis.

The U.S. hotel industry has been steadily improving as more people travel and businesses recover, allowing hotels to increase prices.

Hilton’s adjusted earnings before interest, tax, depreciation and amortization increased 12 percent to $1.96 billion in 2012.

“Given their 2012 EBITDA of about $2 billion, Hilton should have an enterprise value of roughly about $26 billion to $27 billion,” Ryan Meliker a senior analyst with MLV & Co said.

That would make Hilton the biggest hotel chain in the world by market value.

Patrick Scholes, an analyst with Suntrust Robinson Humphrey, expects Hilton shares to trade around the same multiples as Marriott International Inc and Starwood Hotels and Resorts, or around 12-13 times enterprise value EBITDA.

Hotel stocks have been on a tear. The Dow Jones U.S. Hotels index has risen 18 percent this year. Marriott’s stock is up 15 percent, while Starwood is up about 20 percent.

Reuters and other media had reported in August that Blackstone was preparing to bring Hilton to the public market.

Founded in 1919 by Conrad Hilton, Hilton Worldwide’s brands include Conrad, Waldorf Astoria, Doubletree, Embassy Suites, Homewood Suites, Home2Suites, Hilton Garden Inn, Hampton Inn, and Hilton Grand Vacations.

Hilton Worldwide has about 4,000 hotels, resorts and timeshare properties, comprising 665,667 rooms in 90 countries and territories, it said in a filing with the Securities and Exchange Commission on Thursday. (http://link.reuters.com/zet92v)

The Hilton IPO is the second hotel offering for Blackstone this year. In July, it filed with regulators to take Extended Stay America Inc public.

“The only caveat regarding the stock is that we have no idea what Blackstone is going to do with their remaining stake once the company goes public and that might be a slight overhang on the stock,” Meliker said.

According to data from Smith Travel Research Inc, which tracks hotel industry data, revenue per available room (RevPAR) has increased about 6.9 percent over the past three years in the Americas and demand has returned to pre-economic crisis levels.

The Asia Pacific region has also experienced high RevPAR growth during the last three years, primarily fueled by China and to a less degree Southeast Asia.

RevPAR is a key measure of hotel health, calculated by multiplying a hotel’s average daily room rate by its occupancy rate.

SURGING IPO MARKET

The IPO market has surged this year as rising stock prices and low interest rates have enticed investors.

IPOs from private equity-backed companies include industrial and construction supplies company HD Supply Holdings Inc, child care operator Bright Horizons Family Solutions Inc, cruise line operator Norwegian Cruise Line Holdings Ltd and communications company West Corp.

The global volume of IPOs rose 14 percent to $79.2 billion in 2013 up to August, compared with the same period last year, according to Thomson Reuters data.

The $2.2 billion raised by Pfizer Inc’s animal health subsidiary Zoetis Inc has been the largest U.S. IPO so far this year.

Deutsche Bank, Goldman Sachs, BofA Merrill Lynch and Morgan Stanley are the lead underwriters on the Hilton offering.

Hilton plans to use the proceeds from the offering to repay debt and for other general corporate purposes. The filing did not disclose the number of shares on offer or their expected price.

The amount of money a company says it plans to raise in its first IPO filings is used to calculate registration fees. The final size of the IPO could be different.

Original Source: Blackstone Books $1.25 Billion IPO For Hilton Hotels
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