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Garny on Hilton: A five star proposition?
Hilton Worldwide is planning a record breaking IPO for a hotel group and raise as much as USD 2.7 billion, so is this a five star offering? Saxo Bank’s Peter Garnry says it could be and since being acquired by Blackstone Group, things are looking good for the company.
So why the need to launch this IPO now? Peter explains it is “the normal life cycle of private equity investments". He explains that when you have had a stock in your portfolio for around five to seven years you have optimised the business. You then do a public initial offering to get liquidity in order to get returns back to your shareholders.
Hilton is also launching the IPO to pay down its debts; more capital would make it more attractive to investors in public markets, according to Peter.
Hilton was acquired by Blackstone Group at the height of the private equity boom in 2007. Peter explains it means Hilton, which now has some 672,000 rooms across 90 countries is focusing on the right strategy, a strategy which has seen Hilton's operating profit double over the last two years.
Hilton has set a price range for the stock of USD 18 to USD 21 a share. Peter says: "You’re paying a pretty steep premium to get this stock in your portfolio but given the stability of the cash flow and the new strategy we think it’s worth it."
The deal is expected to be shopped to investors over the next week and to be priced on 12 December.
02:14 minutes
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