HYATT IPO: WHY NOW?

This is the first in a series of Hyatt posts we will provide ahead of the IPO.  A top notch hotel company finally going public, but at a fundamental low point for the industry. Does that make sense? We think so.

 

 

On August 5th Hyatt filed an S-1 or a preliminary offering memorandum, to sell approximately $1.15BN of Class A shares.  Given the weak lodging fundamentals, many investors are probably scratching their heads wondering why now?

 

In contrast, we think the timing is right:

  • Despite the weak fundamentals, valuations for lodging companies look rich
    • HOT is trading over 11x 2009 EBITDA
    • MAR trading at roughly 12.5x
    • HST is trading north of 13x
    • Valuations look even richer if you consider 2010E EBITDA which we believe will be lower than 2009 EBITDA for most lodging companies
  • Liquidity event for certain Pritzker family members - The Pritzker family has an agreement in place to divide the empire amongst 11 cousins by 2011.  Letting the public determine the value of Hyatt Hotels Corporation is a more impartial way of pricing this piece of the empire
  • We understand that one of the two other main investors, Goldman, is also pressing for a liquidity event
  • Having a public vehicle is probably the easiest way to raise additional capital to pursue acquisitions
    • One of Hyatt’s goals listed in the Business Strategy section of the S-1 is to “Pursue Strategic Acquisitions and Alliances”
    • As we wrote in “PICKUP IN LODGING DEFAULTS” earlier today, the pickup in large hotel loan defaults means that we should start seeing some attractive deals come to market as banks look to unload these assets

Notwithstanding the public offering, the Pritzker family will still retain control of the company through a dual class voting structure where the existing Class B shares will have 10:1 voting power.  The family, along the other two large holders, Goldman and Madrone GHC, have also agreed to vote their shares as a block when it comes to matters concerning asset sales and acquisitions. Another issue for potential investors to consider is the overhang of share sales by existing holders. Currently, Pritzker family members are restricted to selling up to 20% of their holdings each year through 2015, unless the board decides otherwise.

 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more