Hilton, the world's largest hotel chain, went public Wednesday with the biggest initial public offering (IPO) for a hotel chain in history at $20 per share and investors could not get enough.
Investors snatched up 117.6 million shares of Hilton Worldwide Holdings Inc. Wednesday, a windfall of $2.3 billion for its owners, the Blackstone Group LP. The shares opened Thursday on the New York Stock Exchange with a 7 percent bump, at $21.30 per share.
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"For Blackstone, it doesn't make sense to keep something this valuable on the books," Jeffrey Sica of the New Jersey-based Sica Wealth Management LLC told Bloomberg News. "Hilton’s business has been doing well
, so it makes very good sense for them to do it now."
Hilton Worldwide stated in a news release
that it plans to use the proceeds to repay about $1.25 billion of term loan borrowings outstanding under its senior secured credit facilities.
Hilton owns 700,000 hotel rooms at properties around the world, including New York City's Waldorf Astoria and the Hilton Hawaiian Village in Waikiki.
The Wall Street Journal reported that Blackstone, a New York private-equity firm, bought Hilton Worldwide
for $6.5 billion in equity and layered on about $20 billion in debt in 2007. Blackstone, though, had to write down the value of its initial investment by 70 percent when the global financial crisis hit the hotel industry in 2009.
Blackstone restructured its debt in 2010 and the hotel expanded its brand through franchising that helped increase revenue with minimal capital. The WSJ said Blackstone did not sell any of its shares in the IPO and retained a 76 percent stake in Hilton Worldwide, or $15 billion, according to Wednesday's IPO.
"Hilton has been focused on re-establishing its industry leader status," Lukas Hartwich, lodging analyst at Green Street Advisors Inc. in Newport Beach, wrote in a report, according to the Los Angeles Times
. "Future growth has shifted to primarily non-U.S. markets."
Hilton owns 10 hotel brands including DoubleTree, Homewood Suites, and Hampton Inn. The brand dates back to 1919 when Conrad Hilton purchased his first hotel is Cisco, Texas.
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