Hilton Hotels

Blackstone Inches Ahead With Hilton Deal

Another private equity deal that has a lot of people paying attention is moving ahead. Blackstone’s $26 billion takeover of Hilton Hotels has been closely watched as another indicator of the strength of the buyout market and the willingness of banks and investors to finance the deals. Yesterday Hilton announced that it was kicking off a $1.8 billion tender offer for its existing notes, which will be paid off with new debt financing the acquisition.
The Hilton deal was the last major buyout announced before the private equity LBO market went into its currently catatonic state. Blackstone agreed to a hefty premium for Hilton—the price tag was a 40% mark-up from where the stock was trading before the deal was announced. The total price tag was around $26 billion—$20 billion cash and $6 billion of assumed debt.
In the current market, the deal is considered far riskier than at the time it was signed-up. The risk of a recession poses a real threat to hotel chains, and investors have been balking at the high levels of leverage involved in many of the largest takeovers. Blackstone plans to raise as much as $21 billion to finance the deal. Bear Stearns, Bank of America, Deutsche Bank, Morgan Stanley and Goldman Sachs all committed to finance the deal when it was closed.
The tender offer is just a first step—a small one—but it will likely be welcomed by thsoe who are concerned that all or part of the nearly $400 billion of buyouts waiting to close later this year might be held up by conditions in the credit market.
Press Release [BusinessWire.com]

Paris Hilton’s Imaginary Windfall?

parishiltonlindsaylohanfriendsbikinibeachsteveschwarzmanblackstonehiltonhotelsmaller.jpgWe didn’t expect to spend the morning thinking about Paris Hilton’s renewed friendship Lindsay Lohan. It’s a bit, well, far afield from our usual stomping grounds. But with the gossip pages reporting that friends of Paris were attributing the “frennassaince” to Paris’s joy at the Blackstone Group buying the hotel company that bears her favorite name, the topic was irresistible.
Several readers have brought to our attention the fact that Hilton probably won’t personally benefit much from the sale. Paris Hilton’s grandfather, Barron Hilton, is the co-chairman of Hilton Hotels and personally owns around 5% of the company, according to published reports. According to Reuters, however, Paris Hilton is expected to get little from the sale. Barron is “expected to give the roughly $1 billion that he stands to get from the sale of his 5.3 percent stake to the Conrad N. Hilton Foundation,” Reuters says.
Ordinarily, we’d conclude that this indicates that the reports from Paris friends were wrong. If she’s not getting much from the sale of the company, that couldn’t really be the source for the joyous feelings that have led her to rekindle her friendship with Lindsay, right? But life isn’t always so simple when it comes to Paris.
Paris might not realize she doesn’t stand to gain that much from the sale. In the past, the heiress has had a difficult time distinguishing between her immediate family’s fortune and money controlled by the charitable trust that bears her great-grandfather’s name. Shortly after Hurricane Katrina wreaked havoc on New Orleans and nearby areas along the Gulf Coast, Paris Hilton reportedly told US magazine that she and her family had donated $6 million to the victims. Radar Online (in a story which we, oddly enough, cannot actually find online) revealed, however, that the money had come from the Conrad N. Hilton Foundation, and not from Paris or her immediate family.
We’re not even going to pretend we made the appropriate phone calls to straighten this all out. No one could be reached for comment because we didn’t reach out to them. We feel stupider just for having thought about this long enough to compose this post. We now return you to your regular programming.
Earlier: How Steve Schwarzman Totally Got Paris Hilton and Lindsay Lohan Back Together Again!

The Blackstone Group’s $26 billion bid for Hilton Hotels has certainly ignited speculation about whether another big hotel chain—perhaps Hilton rival Marriot or Starwood—might also get taken out by private equity or whether some group might try to roll-up smaller companies to take advantage of economies of scale and branding.
Supposedly, everyone’s all excited about the hotel business now! Private equity’s here! Chuck Prince is still willing to lend money to keep the music playing! Let’s get this party started! Hot!
All too often the smaller, human-scale stories of the deals get left in the dust while everyone keeps talking about earnings multiples and leverage-to-ebitda ratios. And the story we want to tell is a story of the friendship of two very special young women. A friendship that was torn apart but now, it seems, has been repaired by the healing forces of private equity.
We’re talking, of course, about Lindsay Lohan and Paris Hilton. According to the website Gossip Girls, the “longtime rivalry” between the two favorites of the gossip pages “is over.” It seems that the stint in jail has Hilton rethinking her feuds. But, perhaps more importantly, Hilton has apparently been in good spirits since news of the Blackstone bid broke. A friend of Hilton’s tells the girls that “she’s got to be in a good mood after the Blackstone Group bought the Hilton Hotels, boosting her inheritance.”
Apparently the renewed friendship became public when Hilton attended a birthday party for Lohan on July 3. Somewhere out in St. Tropez, Blackstone chief Steve Schwarzman can breathe the sea air and relax with the ease of a man who knows he has restored a friendship that had long been torn asunder.
Paris Hilton’s Frienaissance With Lindsay Lohan [The Gossip Girls]

A Paris Hilton Joke-Free Blackstone Buyout Post

paris hilton 1.jpg Late Tuesday Blackstone made a $26bn bid for Hilton, trying to find the only thing that could potentially steal press from the KKR IPO. Shares of Hilton (NYSE: HLT) closed at $36.05 on Tuesday, and shot up over 26% to above $45 a share by this morning. Blackstone’s bid is for $47.50 a share.
Unsurprisingly, there was rampant insider trading preceding the Hilton deal. The number of Hilton call options traded on Tuesday before the bid announcement exceeded the average daily trading volume by an ever-so-subtle 600%. The Hilton daily call option volume is usually around 2,900 but shot to 22,000, all before the deal was announced.
One fact that is sure to restore the confidence of the average investor is that not all of the inflated Hilton option volume was a result of insider trading. Some options were traded by following the lead of insider trading. From Dow Jones:

That’s exactly what prompted Jon Najarian, a trader who tracks unusual activity for OptionMonster.com to buy call options on Hilton last week. He spotted a buyer of an unusually large amount of call options on June 27, he said, something that prompted him to alert his clients and add his own position in the calls.

Traders Bought Options Just Hours Before Hilton Deal News [Dow Jones via CNN Money]
Hilton Deal Bolsters Rivals as World Markets Climb [New York Times]

Hilton Expands in China, Paris’s Asian Fetish Sated

paris_narrowweb__200x237.jpgFollowing the merger of its US and British hotel division, Hilton Hotels has started to identify partners in China, as part of its much hyped international expansion. Co-chair and chief executive Steve Bollenbach said that the company is aiming for a 7% growth, with its focus on development in China, India and Eastern Europe.
President and COO, Matt Hart noted: “We are going to target the big opportunities in the big markets. If our target was to have 200 hotels open, we would like to do that in big slugs – 50 to 75 hotels in three different countries, versus five hotels in 20 or 40 countries. We outgrow everybody in the US … We will continue to grow in the US. This year we will add 225 hotels. But growth 10 to 20 years from now [must] come from outside the US.”
Hilton Seeking China Partners for Expansion [Financial Times]