Blackstone Group said late Tuesday it would buy Hilton Hotels in a $26 billion deal that will add one of the largest US hotel chains to the list of companies bought out by private-equity firms this year.
By WILLIAM SPAIN, MARKETWATCHMarketWatch: In-depth global business coverage
Blackstone Group said late Tuesday it would buy Hilton Hotels in a $26 billion deal that will add one of the largest US hotel chains to the list of companies bought out by private-equity firms this year.
Hours after the close of Tuesday trading, Hilton said it had cut a buyout agreement with Blackstone that values the company at $47.50 a share. That is a 40% premium to Monday's closing price and 32% over the Tuesday close, when Hilton shares gained 6.5% to end at $36.05. The deal also includes assumption of Hilton's debt, currently more than $7b.
Trading in Hilton was unusually brisk ahead of the news, with more than twice average daily volume even in a holiday-shortened session - and its rise was better than double that of peers, including Marriott and Starwood .
A spokeswoman for Hilton said the timing of the announcement was linked to a scheduled board meeting Tuesday; she declined to comment on the activity in Hilton shares.
John Ford, a Blackstone spokesman said the announcement "was certainly not engineered to come out at such a time - on the contrary, we would have preferred to have the news break at a time when coverage would have been more widespread."
Hilton's board approved the takeover bid on Tuesday, the company said, and it is looking to close the transaction in the fourth quarter of 2007 subject to shareholder approval. It is not subject to financing contingencies, Hilton said.
The deal is the first major acquisition for Blackstone since it went public on June 22 and was announced only minutes after buyout rival Kohlberg Kravis Roberts filed for its own public offering late Tuesday, seeking to raise $1.25b.
In the announcement, Blackstone said it intends to invest in Hilton "and grow the business for the benefit of owners, franchisees and customers." Blackstone has taken out several lodging chains and rates itself the largest private investor in hospitality.
"Our board of directors concluded that this transaction provides compelling value for our shareholders with a significant premium," said Stephen Bollenbach, Hilton's chief executive, in the announcement.
Blackstone said that it "views Hilton as an important strategic investment (and) no significant divestitures are envisaged as a result of this transaction."
Financing is being provided by Bear Stearns, Bank of America, Deutsche Bank, Morgan Stanley and Goldman Sachs, entities that have also served as financial advisers to Blackstone.
In the gambling-hospitality sector, the size of the Hilton deal is just behind the February takeout of Harrah's Entertainment by Texas Pacific Group and Apollo Management L.P. for $27.8b., including $10.7b. in debt.
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