Hilton Worldwide, the hotel operator owned by Blackstone Group, filed to raise $1.25 billion (R12.4bn) in a US initial public offering (IPO) as hospitality shares trade at close to their highest level in six years.
A filing showed yesterday that the largest hotel chain planned to use proceeds from the offering to pay down debt. The Virginia-based hotelier did not say how many shares it would offer or at what price. The offering size is a placeholder amount used to calculate fees and may change.
At $1.25bn, Hilton’s IPO would be the largest for a hotel company, surpassing Hyatt’s $1.09bn offering in 2009. The stock sale will let New York-based Blackstone realise gains from its biggest single investment, with almost $7bn of equity invested from its property and other funds.
The largest manager of alternative assets will retain a majority of the voting power in Hilton following the IPO, the filing shows.
The offering coincides with increases in hospitality revenue and income industrywide, with the shares of Starwood Hotels & Resorts Worldwide and Marriott International close to six-year highs. The stocks of hotel property investment trusts are close to a five-year high reached in May.
Net income at Hilton, which operates more than 4 000 properties worldwide, rose 39 percent to $352 million in 2012 from a year earlier, on revenue of $9.3bn. The company, led by chief executive Christopher Nassetta, offers lodging under brands including Waldorf Astoria, DoubleTree, Homewood Suites and Hampton Inn.
Blackstone’s 2007 takeover of Hilton for $26bn, which included debt, was the largest ever of a hotel company, Bloomberg data show. The transaction took place at the height of the biggest buyout boom in history, amid a surge in commercial property values.
Deutsche Bank, Goldman Sachs, Bank of America and Morgan Stanley will arrange Hilton’s IPO, yesterday’s filing shows. The same banks and JPMorgan Chase were helping the company refinance about $13.5bn in debt before the stock sale, a person familiar with the matter has said.
At least two Blackstone-backed companies have gone public in the past year. SeaWorld Entertainment raised $807.3m in April, including an overallotment option. Pinnacle Foods raised $667m in an IPO in March. SeaWorld has gained more than 6 percent since its IPO.