According to the Wall Street Journal, a deal could fetch up to $4.5 billion (once you combine equity and debt).
La Quinta is one of the largest operators of limited-service hotels in the United States, featuring more than 80,000 rooms. The chain also has an extensive franchise system, which has been a key part of the growth.
For the most part, La Quinta pursues a low-cost strategy, though it still offers amenities such as flat-screen HDTVs, high-speed Internet, free breakfast and swimming pools.
Blackstone bought La Quinta for about $2.28 billion in late 2005 — part of a larger buying spree in the sector during the period that saw BX snap up Wyndham International, Rihga Royal Hotel, Extended Stay America and Prime Hospitality.
While these deals looked smart — since the economy was booming and room rates were increasing — the timing was far from perfect. Amid the financial crisis, BX’s hotel portfolio took a hit and there was a big-time focus on restructuring.
But the environment has become robust once more, and Blackstone is wasting little time capitalizing. Besides looking at a deal for La Quinta, it has also recently filed an IPO for Extended Stay America, and many people are speculating that a filing is imminent for Hilton Worldwide, which BX bought in 2007 for a whopping $26 billion.
Given all this activity, though, it actually appears that Blackstone might be worried about the hotel business nearing a peak. If so, its analysis could be off the mark — a continued economic improvement should keep valuations healthy across the industry … though perhaps BX isn’t so bullish on the broader picture.
That’s conjecture, of course. But what’s certain is that Blackstone has long been one of the world’s best investors because it realizes it’s impossible to peg the exact top of a market.
And as the saying goes, “You never go broke taking a profit.”
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.