Hilton planning to break records with $2.4bn IPO
HILTON Worldwide Holding, the lodging chain bought by Blackstone in 2007, plans to raise as much as $2.4bn (€1.7bn) in its US initial public offering (IPO), the most ever for a hotel company.
The Virginia-based hotel operator and existing shareholders plan to sell 112.8 million shares for $18 to $21 each, according to a regulatory filing.
Hilton, the world's largest hotel company with more than 4,000 properties including the former Burlington Hotel in Dublin, plans to sell 64.1 million of the total, using proceeds to help repay $1.25bn of debt.
New York-based Blackstone isn't selling any of its stock. Blackstone is taking Hilton public after the chain refinanced some $13bn of debt, capitalising on US stocks near records and a rebound in hotel occupancies and rates.
In the past six years, Hilton chief executive Christopher Nassetta increased the number of open rooms by 34pc, most of them outside the US and in franchised and managed hotels, which require almost no capital investment. He also expanded the development pipeline and frequent-guest programme.
"The things he talked about doing, he's delivered on," said Drew Babin, senior lodging analyst at CBRE Clarion Securities in Pennsylvania. "Hilton has been doing these massive things under the radar."
Mr Nassetta and other Hilton executives will begin meeting potential investors in the IPO today. They'll travel to US cities including New York, Boston, Chicago and Dallas, with the price of the IPO scheduled to be set on December 12.
At midpoint of the IPO range, the company will have a market value of $19.2bn, making it larger than Starwood Hotels and Resorts Worldwide, Marriott, and Hyatt.
Hilton's IPO could raise as much as $2.7bn if extra shares are sold to meet demand, making it the second largest US IPO this year. It would surpass Hyatt's $1.09bn sale in November 2009 as the biggest hotel IPO, based on data compiled by Bloomberg.
Overseas growth potential and hotel-management expertise help make Hilton attractive to investors, according to Arthur Adler, head of the Americas division of Jones Lang LaSalle Inc's hotels group.
"They're growing in Asia, South America and a lot of these emerging markets," he said. "The US is a very mature market. Offshore is still kind of nascent."
Hilton still has 78pc of its rooms in the US, where revpar – an industry measure of average room rates – has been rising since 2010. US revpar is forecast to grow 5.7pc this year and 6pc next year.
Blackstone bought Hilton for $26bn in October 2007, at the tail-end of the biggest buyout boom in history.
After the IPO, Blackstone will hold about 750.6 million Hilton shares, a stake valued at $14.6bn. (Bloomberg)