There's talk of infighting among its founder's heirs and a sluggish appetite for hotel reservations around the globe. But Hyatt Hotels Corp. shares are set to begin trading Thursday now that the company raised $950 million in its initial public offering.
Questions had lingered about whether investors would feel confident enough to snatch up the 38 million shares of the iconic hotel chain that were offered. Among the issues facing the company are disputes between members of the wealthy Pritzker family, the largest holders of Hyatt stock with an 85 percent stake in the Chicago company.
"One thing Wall Street does not like is controversy," said John Fitzgibbon, founder of IPOScoop.
Proceeds from the sale - which was priced late Wednesday at $25 each, near the top end of the $23 to $26 range - will go almost entirely to the family, who will remain in control of the company with about two-thirds of outstanding shares and three-quarters of the shareholder voting power.
The board will include two family members, too: Executive Chairman Thomas J. Pritzker and his cousin Penny Pritzker.
"That basically makes the people that buy into it a junior, silent partner," Fitzgibbon said.
Hyatt won't receive any proceeds from the IPO.
Squabbling among Pritzker heirs, influential but private figures in Chicago's philanthropic, business and political circles, began shortly after patriarch Jay Pritzker's death a decade ago.
Among the contentions are allegations that family members shortchanged trust funds or mishandled the clan's hefty financial legacy and business interests.
The family also has feuded over how Thomas Pritzker administered various family trusts and the dual class structure of Hyatt stock, which gives the family 10 votes per share.
"Disputes ... among Pritzker family members and the trustees of the Pritzker family trusts may result in significant distractions to our management, disrupt our business, have a negative effect on the trading price of our ... common stock," Hyatt cautioned in a regulatory filing last month outlining a series of risks faced by the company when it become publicly traded.
Executives also noted any such problems could heap negative publicity on Hyatt and the family.
A Hyatt spokesman declined to comment.
On top of worries about the family, there's the recession that's kept hotel beds empty as both business and leisure travelers stay home. To compensate, companies - particularly high-end hotels whose rooms used to command top dollar - are slashing prices and offering amenities to woo guests.
"The timing probably isn't the best," said Morningstar hotel analyst Michelle Chang. "I think it's more of a way for the family to sell some of their interest, rather than it being a strategic move for the company necessarily."
So far, discounts have helped occupancy stabilize, but profit, revenue and a key performance measure of revenue for each available room is down dramatically at the biggest chains.
Hyatt said its revenue per available room sank 22 percent for the first nine months of the year while overall revenue fell 17 percent to $2.44 billion for the period ending Sept. 30. Its nine-month loss was $31 million, compared with a profit of $310 million last year.
The finicky IPO market has caused heartache for some companies who've been forced to price shares below expectations. But Hyatt's shares priced slightly above the midpoint of its expected range.
Any money raised from a 5.7 million-share overallotment option designated for underwriters - about $142.5 million - would go back to the company and be used for capital expenditures such as building and construction.
Goldman Sachs & Co. is the lead bookrunning manager, and Deutsche Bank Securities and JPMorgan Securities also are underwriting the deal. Shares will trade under the ticker "H" on the New York Stock Exchange on Thursday.
Hyatt was founded in 1957 by Jay Pritzker and first taken public in 1962, but has been privately held for more than 25 years.
It owns, operates, manages or franchises 415 Hyatt-branded properties, including the Hyatt, Park Hyatt, Hyatt Regency and Grand Hyatt chains, in 45 countries.
Source : STAR
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