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Hilton Plans Largest Hotel IPO


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It’s been a while since we have focused on what companies were preparing to go public. The last company we adamantly followed was the social media site Twitter, who has been one of the most successful technology companies to go public to date. The latest company to announce it’s initial public offering was not another tech startup, no instead one of the largest names in the hospitality industry. With the Blackstone Group’s investment, Hilton Worldwide Inc plans to launch it’s initial public offering before the end of this year. If all goes well, Hilton will result in the largest hotel IPO to emerge. We’ll take a look at how the Blackstone Group and Hilton Worldwide arrived at this decision and will see what it takes to be considered one of the largest hotel IPO to be launched.

(Photo credit to: PassengerTerminalToday.com)

(Photo credit to: PassengerTerminalToday.com)

Planning the Hilton IPO

When the Blackstone Group invested $6.8 billion back in 2007 they took Hilton Worldwide Inc private, which was one of the largest leveraged buyouts before the global financial crisis in 2008.

They took it for $26.7 billion (including debt) and have a 76.2% stake in Hilton Worldwide. The initial public offering for later this month will sell 11.5% of the shares, increasing the overall company value to $32.5 billion. The Blackstone Group plans to double its initial investment as Hilton Worldwide goes public, making their piece of the pie worth $15.7 billion.

Hilton Worldwide’s goal is to raise up to $2.37 billion as they prepare the largest hotel IPO launch.

Why Launch Hilton IPO Now?

Many are puzzled as to why the hotel/hospitality titan has decided to go public this year. It turns out that the Blackstone Group had timed this to launch as the overall global consumer travel demand has been gradually increasing. This past year has garnered great results as the hotel industry continues to recover. Both room rates and occupancy levels are expected to continue to increase into the next year, following the present 30% rise.

Hilton’s IPO would only be second to an oil pipeline holding company for the title of largest IPO of 2013. Blackstone has seen how initial public offerings have helped a wide variety of companies, like Hyatt Hotels Corp, who raised $950 million back in 2009. Just last month another one of their hotel companies that they back (Extended Stay America) raised approximately $565 million. They have no plans of stopping either, looking for a hotel hat trick as they are planning to take the hotel chain La Quinta public following Hilton’s IPO.

Before the end of this year, the largest hotel IPO will offer 112.8 million shares between $18 and $21 each. By these numbers it should give the company an overall equity value of $20.7 billion. Hilton Worldwide plans to begin repaying their $11.8 billion in debt by utilizing $1.25 billion of the largest hotel IPO proceeds towards it directly.

Hilton IPO, Good or Bad Idea?

The Hilton Worldwide umbrella encompasses a vast amount of properties spanning over 90 countries and 4,000 hotels. Just a few years shy of a century old, the hospitality industry has had their fair share of ups and downs. As many are still recovering for the financial crisis from five years ago, Hilton’s plans and reasons are proof that no company or group was safe or absolved from debt. Luckily, they have the Blackstone Group supporting and assisting them through the entire initial public offering process, which should definitely help them get everything in place for when they plan to launch it later this month.

With such a wide variety of IPOs emerging, what do you think? Will you be one of the individuals to invest in Hilton Worldwide?

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