Blackstone Preps Hilton for Flotation

Back in August 2007, I wrote about Blackstone’s acquisition of Hilton. "If you want my considered opinion about the Blackstone acquisition of Hilton, just remember that private equity investors buy and sell companies usually with other people’s money," I declared. I continued:

They put up a tiny slice of their own capital and multiply it with investments from pension funds, wealthy individuals and foreign government investments.  They shake the acquired companies up, cut spending, reduce reserves and then resell them to smaller investors in the public markets.  Some of these equity firms “rip, strip and flip”.  Look at the Hilton family of brands one year from now to see which have been sold and discarded.  Look at the roster of Hilton executives one year from now to see whether a personnel bloodbath has taken place.

Finally, let’s see if Jonathan Gray, a senior managing director at Blackstone, lives up to his statement, “we are committed to investing in the company and working with Hilton’s outstanding owners and franchisees to continue to grow and enhance the business.” What will happen with the overlap in the middle tier with Hilton Garden Inns, La Quinta and Hampton Inns?  Or in the luxury tier with the overlap of the Waldorf-Astoria Collection, Conrad Hotels & Resorts and the Blackstone LXR portfolio?

Almost three and a half years later, the following report appeared on the Hotels blog (3/21/2011):

NEW YORK CITY Blackstone Group LP is reportedly organizing the financial records of Hilton Worldwide in a preliminary step toward floating the company on the international markets.

There is no timetable for the floatation, according to a report in The Independent of London, but Blackstone is said to have accountants poring over Hilton’s books to bring them up to international financial reporting standards.  Blackstone is leaning toward selling Hilton Worldwide as a complete unit, according to the report; previously, the private equity giant was thought to be open to unloading Hilton in pieces.

“This is a long process of preparation. The focus is getting the timing right, so that if you wake up one morning and decide to go for it, you can,” an unnamed source, identified as being “close to the two groups,” tells the newspaper.

Blackstone acquired Hilton in a US $26 billion deal nearly four years ago, at the top of the market, in a highly leveraged deal that would have been nearly impossible in the current financial climate.


About the author: Stanley Turkel, MHS, ISHC operates his hotel consulting office as a sole practitioner specializing in franchising issues, asset management and litigation support services. Turkel’s clients are hotel owners and franchisees, investors and lending institutions. Turkel serves on the Board of Advisors and lectures at the NYU Tisch Center for Hospitality, Tourism and Sports Management. My new book is available at reduced rates. Vist GreatAmericanHoteliers.com.

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