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Hilton files $1.25-billion IPO
September 12 2013

Hilton Worldwide filed a registration with the SEC for an initial public offering of at least $1.25 billion.

Highlights
  • Initial offering is $1.25 billion.
  • Mid-year earnings rose 68% from the same period in 2012.
  • Hilton has 4,041 hotels across 10 brands.
     
By Ed Watkins
Editor-at-Large
ewatkins@hotelnewsnow.com

McLEAN, Virginia—Hilton Worldwide Holdings filed a registration statement Wednesday with the United States Securities and Exchange Commission for an initial public offering. The offering has an initial value of $1.25 billion, which the filing explains is “estimated solely for the purpose of determining the amount of the (SEC) registration fee.”

According to the filing, after completion of the offering, The Blackstone Group L.P. will continue to own a majority of the new company’s voting power.

Spokespeople for both Hilton and Blackstone declined to comment on the filing, citing regulatory issues.

Jeff Good, president of HRC Hotels, an East Lansing, Michigan-based company that owns 21 hotels—including 10 that fly the Hampton Inn/Hampton Inn & Suites flag and four Homewood Suites properties—said the filing cements the direction of Hilton’s brands.

“It’s no surprise. Everybody knew this was going to come, it was just a matter of when,” hesaid. “The one thing it does at least for now is it washes the rumors of Blackstone wanting to peel off the brands and sell them individually. This proves there’s power in the enterprise, and it probably will stay intact for some time to come.”

The next big question for Hilton will be what the management team will look like once the company is publicly traded, Good said.

Ryan Meliker, an analyst with MLV & Company, said the Hilton IPO may be the first of several hotel company filings over the next 12 to 18 months, citing Extended Stay America, another Blackstone-owned company that in late July filed to go public.

“And who knows what Blackstone will do with La Quinta or its (G6 Hospitality) business,” he said. “And Apple is consolidating  its (real estate investment trusts) to have a scale in which they could go public. And there are various other private hotel REITs that could go public. An IPO is a logical solution for many of these companies.”

He said the Hilton announcement could have a temporary negative effect on other hotel company stocks. For example, last year Lehman Brothers Holdings filed  a public offering for Archstone, an owner of apartment real estate. The IPO depressed the share prices of two other REITs in the market, Meliker said.

“Investors were either selling stakes in those two companies to have cash to build their positions in the new company, or they were investors who wanted to wait for the IPO so they could get in at a discount,” he said. “I wouldn’t be surprised to see that happen to Marriott (International), Starwood (Hotels & Resorts) and to a lesser extent Host Hotels, especially since all those stocks are trading above their long-run average multiples.”

An affiliate of The Blackstone Group took Hilton Hotels Corporation private on 3 July 2007 in a $26.7-billion deal, which was one of the largest leveraged buyouts that preceded the 2008 global financial crisis. The buyout firm paid $47.50 a share—a 40% premium to its closing price at the time.

In 2009, Hilton Hotels Corporation changed its name and logo to Hilton Worldwide and moves its headquarters from Beverly Hills, California, to McLean, Virginia.

For the six months ended 30 June, Hilton had revenues of $4.6 billion, up 2.7% from the same period in 2012, according to the filing. During the period, the company posted a net income of $189 million,* up 66% from a year earlier.

The Hilton system includes 10 brands—Waldorf Astoria, Conrad, Hilton Hotels & Resorts, DoubleTree, Embassy Suites, Hilton Garden Inn, Hampton Inn, Homewood Suites, Home2Suites and Hilton Grand Vacations—and 4,041 hotels and timeshare properties, with 665,667 rooms in 90 countries and territories.

Correction: An earlier version of the story misstated Hilton's net income for the six months ended 30 June.

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