Hilton Hotels Set For $2.4 Billion IPO, In Massive Private Equity-Backed Launch

Reflecting strong demand from investors, Hilton Worldwide Holdings Inc., the world’s largest hotel operator, moved its initial public offering up to Wednesday as it seeks to raise as much as $2.4 billion after the markets close.

The McLean, Va., company and its existing shareholders plan to sell as many as 112 million shares at $18 to $21 apiece. Initially, investors thought the company would start trading Friday on the New York Stock Exchange under the ticker HLT.

If Hilton sold at the midpoint of $19.50 per share, the hotel operator could be valued at about $31.7 billion after the IPO by one measure, according to Bloomberg. That premium valuation would be relative to rivals like Marriott International Inc. (NASDAQ:MAR) and Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT).

Several banks including Goldman Sachs Group Inc. (NYSE:GS) and Deutsche Bank AG (USA) (NYSE:DB) are joint bookrunners on the deal, according to IPO intelligence firm Renaissance Capital.

Hilton’s IPO would be the biggest hotel launch on record, and the second-biggest U.S. IPO this year, if it raises its potential maximum of $2.7 billion, at the high end of its proposed share-price range. That’s more than Twitter Inc.’s (NYSE:TWTR) $1.8 billion IPO.

The launch would also count as one of the private equity industry’s most profitable deals, Bloomberg reports. New York-based Blackstone Group LP (NYSE:BX), which bought Hilton in 2007 for $26 billion, stands to make a paper profit of about $8 billion. That would be second only to the $10.1 billion profit made by Apollo Global Management LLC (NYSE:APO) from its 2008 investment in chemical maker LyondellBasell Industries NV (NYSE:LYB).

The strong interest in Hilton's IPO roadshow is seen as a positive sign that lodging and capital markets are recovering from the credit crisis. Hilton’s sale could be five times oversubscribed, according to sources cited by Bloomberg. The company reported a profit of $352 million in 2012, up 39 percent from a year earlier, on revenue of $9.3 billion.

Blackstone isn't selling its Hilton shares in the IPO, but its stake will increase in value after the deal. If the IPO shares sell around $19.50, Blackstone would have about a 76.2 percent stake in Hilton, roughly valued at $14.6 billion. Blackstone CEO Stephen Schwarzman has said he intends to remain a Hilton shareholder for several years.

Analysts have lauded Blackstone’s turnaround of Hilton's operations and management, pointing out that Blackstone timed the public launch well, especially given a bullish U.S. stock market.

Ian Weissman, managing director at International Strategy & Investment Group LLC, which doesn't own a stake in Hilton, told Bloomberg: “It’s a good time to be issuing stock for hotel companies. We’re in a sweet spot of the hotel cycle.”

--

(Note: Photo by Shutterstock.com.)