Hilton Hotels Corp., the chain founded by Conrad Hilton 88 years ago, agreed to be purchased by buyout firm Blackstone Group LP for about $20 billion, the biggest acquisition of a hotel company.
Blackstone will pay Hilton investors $47.50 for each of their shares, the hotel chain said in a statement today. That's 32 percent more than its closing price today. Barron Hilton, Conrad's son and co-chairman of the company, will get $990 million for his 20.8 million shares.
Hilton, the second-biggest U.S. chain behind Marriott International Inc., has more than 2,800 hotels worldwide. Blackstone, which owns the La Quinta chain, is among private- equity firms that are buying hotel companies to profit from their cash flow and real estate holdings.
``It's a classic Blackstone play: the size, the asset class, the management and the brand,'' said Michael Pralle, who ran General Electric Co.'s GE Real Estate unit, with $59 billion in assets, before resigning in June to pursue other interests.
Including the assumption of debt, the transaction totals $26 billion.
Shares of Hilton rose $2.18, or 6.4 percent, to $36.05 in composite trading on the New York Stock Exchange before the announcement.
``At the price it was trading, it was an exceptionally cheap stock for a very strong portfolio of brands that have exceptional international growth prospects,'' said Amit Kapoor, an analyst at Gabelli & Co. in Rye, New York, which owns about 5 million shares of the company.
No Other Bidders
Shares of Blackstone, which went public last month, rose 45 cents to $29.72. Blackstone owns more than 100,000 hotel rooms in the U.S. and Europe.
Outgoing Chief Executive Officer Stephen Bollenbach declined in an interview to say if he expects anyone to top Blackstone's offer, adding ``we've seen no other bidders.''
The company owns, manages or franchises more than 480,000 hotel rooms worldwide under brands such as the Waldorf=Astoria, Doubletree and Homewood Suites by Hilton.
What started in 1919 as a single property in Cisco, Texas, grew into a hotel dynasty with the some of the richest people in the U.S. Forbes magazine estimated that Barron Hilton is worth $1.3 billion. Barron's socialite granddaughter Paris is the star of a reality television show and last month served time in jail for parole violations in a drunk-driving case.
The first hotel with the Hilton name opened in 1925 in Dallas, and the company became publicly traded in 1946. Hilton purchased New York's luxury Waldorf=Astoria hotel in 1949.
In 1964, the company spun off Hilton International, then reunited with it last year by buying the lodging unit of U.K.- based Hilton Group Plc for $5.71 billion.
Blackstone's purchase eclipses the 1998 takeover of ITT Corp. by Starwood Hotels & Resorts Trust for $14.6 billion, including debt.
The company in May named Matthew Hart as chief executive officer to succeed Bollenbach. Bollenbach and Hart engineered the Hilton Group purchase, giving it access to international markets for the first time since 1966.
Bollenbach said it was too early to say what role Hart would play in the company.
Blackstone said it didn't plan to make any ``significant'' property sales as part of its acquisition.
Financing commitments were provided by Bear Stearns Cos., Bank of America Corp., Deutsche Bank AG, Morgan Stanley and Goldman Sachs Group Inc., all of which served as financial advisers to Blackstone. Simpson Thacher & Bartlett LLP offered legal advice.
Hilton was advised by UBS AG and Moelis Advisors, the boutique investment bank opened yesterday by UBS's former top dealmaker in the Americas, Ken Moelis. Moelis resigned from the Swiss bank in March, though he remained an employee until June 30, after Blackstone began to negotiate its deal with Hilton. He declined to comment.
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