Tonight, Hilton expects to price 112.8 million shares at a range of $18 to $21 on the NYSE. Assuming the deal gets struck at the mid-point, it will be the second-largest transaction for the year, even beating out Twitter (TWTR). Hilton will also be the biggest hotel IPO in history — and will have the largest market cap of its peers.
But things weren’t always so rosy. Back in 2007, Hilton pulled off a massive $26 billion going-private transaction with the Blackstone Group (BX). Unfortunately, the timing was horrible and the hotel operator almost imploded amid the financial crisis and the deep recession.
But the dealmakers at BX had a plan to deal with the challenges. To this end, the partners brought in CEO Christopher Nassetta, who was formerly at the helm of Host Hotels & Resorts (HST).
Nassetta wasted little time in slashing costs and implementing new systems. He also focused on a franchise strategy, which meant devoting less capital for costly real estate development.
The efforts were enough to allow for a remarkable turnaround. The industry hasn’t added much in the way of new room capacity since the recession, which has helped Hilton maintain pricing. Of course, the economy also started to improve, which bolstered the fortunes of hotel operators like Starwood Hotels & Resorts (HOT), Marriott International (MAR) and Wyndham Worldwide (WYN).
As for the IPO, BX does not plan to sell any shares, and instead looks to remain a long-term Hilton holder. And while the IPO will not be like a hot tech deal, it should still do fairly well. After all, the most recent hotel offering, from Extended Stay America (STAY), is up about 25% since mid-November — another great deal from BX.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.