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Hilton Worldwide Holdings Inc. (NYSE: HLT) stock opened trading on the New York Stock Exchange Thursday, popping 7.5% Thursday from its initial price of $20. Shares were up another 2.9% a little after noon Friday.
Hilton sold 117.6 million shares, raising $2.35 billion in its initial public offering (IPO).
The deal was the second largest IPO of 2013, far outpacing Twitter Inc. (NYSE: TWTR) – the hottest deal of the year – last month, and less than the $2.8 billion Plains GP Holdings LP (NYSE: PAGP) raised in the year's largest deal.
Hilton, the world's largest hotel company with nearly 670,000 rooms worldwide, is the largest hotel IPO deal in market history.
The Hilton IPO caps a remarkable turnaround since the hotel operator's private takeover by Blackstone Group LP (NYSE: BX) in 2007 – a deal that at one point looked doomed…
Hilton: Cashing in on a Hot Market
At the onset of the financial crisis, private equity firms swooped up companies when the economy tanked. Now those firms are looking to cash in when the market is surging and investor sentiment is high.
Blackstone's acquisition of Hilton was a huge story when it happened. At the time, there were many questions on whether the equity firm ultimately paid too much, after acquiring it for $26 billion.
Blackstone borrowed about $20.5 billion to buy Hilton. It used profits from the hotel chain to pay down the debt – instead of using that money for special dividends, which is often the case.
Then the financial crisis hit and reduced the value of Blackstone's Hilton investment. In 2010, Blackstone restructured the deal with its lenders.
The renegotiating helped Blackstone pay off its debt when interest rates were low. Then it continued to use Hilton profits to pay off lenders, and used cost-cutting measures to make Hilton more profitable.
The reason to come to market now is Blackstone is looking to take advantage of investor appetite for the hospitality industry. Hotels have recovered greatly since the financial crisis, and other major hotel chains are currently trading near all-time highs…
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.