Blackstone (BX) has been revving up its dealmaking machine this year, and now it looks like it’ll finally churn out a long-expected transaction: a Hilton IPO.
After turning loose SeaWorld (SEAS), Pinnacle Foods (PF) and PBF Energy (PBF), Blackstone reportedly is prepping the hotelier, which is one of its biggest assets, for the public markets. A Wall Street Journal report says BX company has retained four banks — Deutsche Bank (DB), Goldman Sachs (GS), Bank of America (BAC) and Morgan Stanley (MS) — to prepare for a public offering. It also looks like the first step will be a refinancing of about $13 billion in debt.
A Hilton IPO certainly would be an impressive achievement for Blackstone.
BX shelled out $26.7 billion for Hilton back in 2007, the peak of the private equity boom. When the financial crisis hit, the transaction looked dire, but Blackstone’s team was far from passive and worked quickly to keep Hilton viable. Some of the moves included installing new senior managers, including CEO Christopher Nassetta. The former head of Host Hotels & Resorts (HST) wasted little time in restructuring the balance sheet and slashing expenses.
As it turns out, the recession had some positive impacts. For one, there has been little new construction in the industry since financing has been tough to obtain. So as the economy has come back — albeit at a sluggish rate — there has been growing demand from both business travelers and vacationers.
There is no publicly available information on Hilton’s financials, but BX did provide a hint in its recent Investor Day presentation, which showed that 2013 EBITDA is expected to be 58% better than in 2009.
Of course, Hilton is a global powerhouse, with nearly 4,000 properties across the globe. Some of its brands include DoubleTree, Embassy Suites, Homewood Suites and Hampton Inn — which have allowed the company to take advantage of different price points and customer segments.
As a note, Hilton isn’t Blackstone’s only play in the sector. A few weeks ago, the company filed an S-1 for Extended Stay America, and there’s also buzz that BX recently hired bankers for a La Quinta IPO.
Given all this activity, it’s reasonable to think that the hotel market is getting close to the top; Blackstone has a good track record of getting the cycles right. Still, Blackstone is sure to know a deal probably won’t go live until the first half of 2014 because it’ll have to first refinance Hilton’s debt, so it likely expects that tight supply and growing economy will keep investors interested in a Hilton IPO until then.
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.