Hilton Seeking $2.4 Billion in IPO

Hotel chain Hilton Worldwide Holdings purchased by Blackstone Group back in 2007 is planning to raise up to $2.4 billion in its initial public offering in the U.S. That amount will be the most every raised by a hotel company.

The hotel operator, based in McLean, Virginia, and its existing shareholders plan to sell the 112.8 million shares for between $18 and $21 apiece. Hilton, the largest hotel company in the world with over 4,000 properties, is planning to sell 64.1 million of the grand total, using those proceeds to repay debt of over $1.25 billion. Blackstone will not be selling any stock.

Blackstone is taking the hotel company public after the hotel chain refinanced over $13 billion in debt, capitalizing on the near records of U.S. stocks and the rebound experienced in hotel rates and occupancies.

Over the last six years, Christopher Nassetta, the CEO of Hilton, increased the total number of rooms by over 34%, with most overseas and in managed and franchised hotels, which require little if any capital investment. Nassetta also expanded the frequent guest program and development pipeline.

Only 11.5% of the company is being offered in the IPO. The company will have a value on the market of $19.2 billion at the midpoint of the projected price range. That value compares to $14.3 billion of the chain Starwood Hotels and Resorts and Marriott International’s $14.1 billion.

The IPO for Hilton could take in as much as $2.7 billion, if extra shares are sold to meet unexpected demand. If that happened, it would be this year’s second largest IPO in the U.S. after the Plains GP Holdings. It would also pass Hyatt Hotels $1.09 billion IPO that took place in November of 2009, as the largest IPO for lodging.

Hotel management expertise and growth potential overseas help Hilton to be an attractive option to investors, said one industry analyst.

Over 78% of Hilton’s rooms are still in the United States, where revenue industry wide per available room, which is a measure of the daily average room rates and hotel occupancies, has been going up since 2010. It is expected to increase as much as 5.7% in 2013 and 6% in 2014.

In October of 2007, Blackstone purchased Hilton for over $26 billion.

 



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