HILTON HOTELS: WHAT'S THAT SMELL?

When a private company starts issuing press releases like a public company, it probably wants to be a public company.  We smell IPO.

 

 

In another sign of the bullish times, Blackstone may be sniffing to make a public exit of its investment though an IPO later this year.  Why else would they be publishing press releases that highlight how they are the fastest growing major lodging company?

 

On January 24th, Hilton Worldwide put out a press release ahead of the ALIS conference highlighting that it “has become the fastest growing major hotel company, expanding its portfolio by 29 percent since June 2007 and surpassing its competitors in total rate of room growth…Our momentum will continue with one of the largest pipelines in our history and in the industry."  There were rumors last March that Blackstone was testing the waters for an IPO last year but perhaps the second time will be a charm.  Hilton CEO Chris Nassetta commented last week that the company is thinking about an IPO but is in “no rush to go public."  If these RevPAR trends continue, they may not be so patient.

 

As a reminder, Blackstone purchased Hilton for $26BN in July 2007 and saddled the company with $21BN of debt.  In February 2010, Blackstone restructuring and reduced Hilton’s debt load to $16BN.  In 2006, HLT’s Adjusted EBITDA was $1.75BN.  We think $1.8BN in 2012 EBITDA isn't far-fetched.  If they can get a reasonable 12x forward multiple, then Blackstone would be close to par on their $22BN investment ($26BN- $4BN in debt reduction).  Currently, Hilton has 633k hotel and timeshare rooms compared to 500k in 1Q07.