Hilton Seeks as Much as $2.4 Billion in Biggest Hotel IPO

Dec. 2 (Bloomberg) -- Hilton Worldwide Holdings, the lodging chain bought by Blackstone Group in 2007, plans to raise as much as $2.4 billion in its U.S. initial public offering, the most ever for a hotel company. Cristina Alesci reports on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Hilton Worldwide Holdings Inc. (HLT), the lodging chain bought by Blackstone Group LP (BX) in 2007, plans to raise as much as $2.4 billion in its U.S. initial public offering, the most ever for a hotel company.

The McLean, Virginia-based hotel operator and existing shareholders plan to sell 112.8 million shares for $18 to $21 each, according to a regulatory filing today. Hilton, the world’s largest hotel company with more than 4,000 properties, plans to sell 64.1 million of the total, using its proceeds to help repay $1.25 billion of debt. New York-based Blackstone isn’t selling any of its stock.

Blackstone is taking Hilton public after the chain refinanced about $13 billion of debt, capitalizing on U.S. stocks near records and a rebound in hotel occupancies and rates. In the past six years, Hilton Chief Executive Officer Christopher Nassetta increased the number of open rooms by 34 percent, most of them overseas and in franchised and managed hotels, which require almost no capital investment. He also expanded the development pipeline and frequent-guest program.

“The things he talked about doing, he’s delivered on,” said Drew Babin, senior lodging analyst at CBRE Clarion Securities in Radnor, Pennsylvania. “Hilton has been doing these massive things under the radar.”

Photographer: Brent Lewin/Bloomberg

Blackstone bought Hilton for $26 billion in October 2007, at the tail-end of the biggest buyout boom in history. Close

Blackstone bought Hilton for $26 billion in October 2007, at the tail-end of the... Read More

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Photographer: Brent Lewin/Bloomberg

Blackstone bought Hilton for $26 billion in October 2007, at the tail-end of the biggest buyout boom in history.

Largest IPO

Nassetta and other Hilton executives will begin meeting potential investors in the IPO starting tomorrow, according to a schedule obtained by Bloomberg News. They’ll travel to cities including New York, Boston, Chicago and Dallas, with the price of the IPO scheduled to be set on Dec. 12 after the close of trading, the schedule shows.

At the midpoint of the IPO range, the company will have a stock-market value of about $19.2 billion, making it larger than Starwood Hotels & Resorts Worldwide Inc. (HOT), Marriott International Inc. (MAR), and Hyatt Hotels Corp. (H)

Hilton’s IPO could raise as much as $2.7 billion if extra shares are sold to meet demand. That would make it the second-largest U.S. IPO this year, after Plains GP Holdings LP, an affiliate of an oil and gas pipeline company. It would surpass Hyatt’s $1.09 billion sale in November 2009 as the biggest lodging IPO, based on data compiled by Bloomberg.

Overseas growth potential and hotel-management expertise help make Hilton attractive to investors, said Arthur Adler, head of the Americas division of brokerage Jones Lang LaSalle Inc.’s hotels group.

“They’re growing in Asia, South America and a lot of these emerging markets,” he said. “The U.S. is a very mature market. Offshore is still kind of nascent.”

Blackstone’s Profit

Hilton still has 78 percent of its rooms in the U.S., where industrywide revenue per available room, a measure of average daily room rates and occupancies, has been increasing since 2010. U.S. revpar is forecast to grow 5.7 percent this year and 6 percent next year, according to STR, a Hendersonville, Tennessee-based lodging data provider.

Blackstone bought Hilton for $26 billion in October 2007, at the tail-end of the biggest buyout boom in history. The firm and its investors put in about $6.4 billion of equity in the buyout and subsequent debt restructuring, making it Blackstone’s biggest investment to date, according to a person with knowledge of the matter. The deal, by Blackstone’s real estate and private-equity funds, looked like a money loser before the market rebounded from the credit crisis.

Biggest Stakeholders

After the IPO, Blackstone will hold about 750.6 million Hilton shares, a stake of 76.2 percent that is valued at $14.6 billion -- or about 2.3 times the equity investment -- at the midpoint of the price range, according to the filing.

A company whose investments are managed by GIC Pte, Singapore’s sovereign-wealth fund, will own 49.5 million shares, or 5 percent of Hilton, and Nassetta, Hilton’s president and CEO, will hold about 7.6 million shares, valued at $148.2 million.

Existing stockholders are selling 48.7 million shares in the IPO, according to the filing. The selling shareholders include a unit of Goldman Sachs Group Inc., which is also one of the underwriters and a lender to Hilton.

Goldman Sachs will receive more than 5 percent of the offering proceeds, according to the filing. That could work out to at least $135 million if the IPO raises as much as $2.7 billion. Andrea Raphael, a spokeswoman for New York-based Goldman Sachs, declined to comment.

Other managers of the offering are Deutsche Bank AG, Bank of America Corp. and Morgan Stanley. The shares will be listed on the New York Stock Exchange under the symbol HLT.

Texas Roots

Hilton -- whose 10 brands include Waldorf Astoria, DoubleTree, Homewood Suites and Hampton Inn -- dates to 1919, when founder Conrad Hilton bought his first hotel in Cisco, Texas. The company reported 2012 net income of $352 million, up 39 percent from a year earlier, on revenue of $9.3 billion.

This year has been the busiest for real estate IPOs since 2004, Bloomberg data show. The biggest real estate IPO this year was Empire State Realty Trust Inc., owner of New York’s Empire State Building, which raised $1.07 billion in October.

To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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