Blackstone To Buy Hilton for $26 Billion
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In another sign of the surging financial clout of corporate buyout firms, Beverly Hills-based Hilton Hotels Corp. agreed Tuesday to sell itself to private-equity firm Blackstone Group in a deal valued at $26 billion.
Shareholders of Hilton would get $47.50 a share in cash, a 40% premium over the stock’s closing value Monday. The stock jumped $2.18 to $36.05 Tuesday before the deal was announced.
Blackstone — which is one of the biggest players in the corporate buyout business and sold shares in itself to investors last month — already is a huge name in hotels: It owns more than 100,000 rooms in America and Europe, including the La Quinta Inns chain, the Golden Door spa in San Diego and the Boulders Resort and Spa in Arizona.
Hilton has more than 480,000 rooms in 76 countries. Its brand names include Hilton, Conrad Hotels, Doubletree, Hampton Inns, and Waldorf-Astoria.
Although corporate takeover activity in general has mushroomed this year, Hilton had not been rumored to be a buyout candidate. At the close of trading Monday, its stock was down slightly year to date.
The lack of movement in the shares may have made a Blackstone offer more appealing.
In an interview, the co-chairman of Hilton, Stephen Bollenbach, said he considered the Blackstone offer “a healthy premium. That’s what makes this so compelling. It makes us happy and anxious to recommend this to the shareholders.”
A senior managing director at Blackstone, Jonathan Gray, said in a statement that “it is hard to imagine a better strategic fit for us than Hilton. This transaction is about building the premier global hospitality business.” Hilton would join a Blackstone stable of companies that includes retailer Michaels Stores Inc., Freescale Semiconductor, computer chip firm, and sock maker Gold Toe-Moretz.
Buyout firms such as Blackstone are funded by big-money investors such as pension funds and wealthy families. To buy companies, they typically put up relatively small amounts of capital and use borrowed money for the rest.
Historically, buyout firms have purchased companies with an eye toward eventually reselling them or taking them public again within a few years. Often, buyout targets have been companies that can be restructured with cost-cutting or other moves to make them more profitable.
As more public companies have been snatched up by private-equity buyers over the past year, some critics have accused buyout firms of enriching themselves at the expense of workers whose jobs may be lost as the purchased companies are restructured.
In the news release announcing the deal Tuesday, the participants said Blackstone “intends to invest in the Hilton properties and brands globally to enhance and grow the business for the benefit of owners, franchisees, and customers.” Blackstone said it had expanded its La Quinta operations by 45% since it bought the chain in January 2006.
The firms said that “Blackstone views Hilton as an important strategic investment; no significant divestitures are envisaged” as a result of the deal.