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

Bloomberg

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Hilton Worldwide Holdings Inc., the lodging chain bought by Blackstone Group LP 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 Monday. 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."

Nassetta and other Hilton executives will begin meeting potential investors in the IPO starting Tuesday, 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 market value of about $19.2 billion, making it larger than Starwood Hotels & Resorts Worldwide Inc., Marriott International Inc., and Hyatt Hotels Corp.

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."

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.

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