LOS ANGELES - Hilton Hotels Corp. said Tuesday it has agreed to be acquired
by The Blackstone Group LP for $20.1 billion in cash. The private equity group
agreed to buy all outstanding Hilton shares for $47.50 each, a 32 percent
premium over Tuesday's closing stock price. The companies valued the deal at $26
billion including debt.
Hilton's board approved the terms
Tuesday. The company said the deal would close in the fourth quarter pending
A general view of the Hilton hotel in the Universal City area
of Los Angeles July 3, 2007. [Reuters]
"Our board of directors concluded that this transaction provides compelling
value for our shareholders with a significant premium," Stephen F. Bollenbach,
Hilton's co-chairman and chief executive, said in a statement.
The acquisition would take Beverly Hills-based Hilton Hotels private and
boost Blackstone's portfolio of lodging properties. Blackstone owns more than
100,000 hotel rooms in the United States and Europe, including La Quinta Inns
and Suites as well as LXR Luxury Resorts and Hotels.
Hilton Hotels owns or operates 2,800 hotels and 480,000 rooms in 76 countries
and territories and includes such brands as Doubletree, Embassy Suites and
Among Hilton's premier hotels is the Waldorf-Astoria in New York.
Blackstone said it intends to invest heavily in Hilton and does not foresee
any significant divestitures.
"It is hard to imagine a better strategic fit for us than Hilton with its
world-class people, brands and network of hotels," said Jonathan Gray, senior
managing director at Blackstone. "We are committed to investing in the company
and working with Hilton's outstanding owners and franchisees to continue to grow
and enhance the business."
Hilton recently announced that Matthew J. Hart, the company's president and
chief operating officer, would succeed Bollenbach as president and CEO effective
Jan. 1, 2008. It was unclear whether Hart would remain with the company after
"Blackstone likes the management here," Bollenbach told The Associated Press.
"Matt continues to be COO and our plans remain the same."
Hilton has been aggressively expanding since 2005, when it bought Britain's
Hilton Group PLC for $5.7 billion cash, reuniting two brands that split in the
1960s. The deal allowed Hilton, which had been limited to properties in the US
and Canada, to become a global player.
In 2006, Hilton's revenue nearly doubled to $8.16 billion, and net income
climbed 24 percent.
The company had raised its 2007 estimates for per-room revenue, a key
industry measure, in a sign that its expansion plans were being matched by
increased worldwide demand.
Hilton's expansion plans, especially in new territories such as India, and
the steady stream of fees the company gets for managing franchised properties
worldwide, proved attractive to Blackstone, said Jonathan Galaviz, a partner at
Globalysis Ltd., a Las Vegas-based consultancy.
"Blackstone feels those type of international expansion plans bode well for
the long-term viability of Hilton as an asset," Galaviz said.
"I would expect to see continuing interest from private equity in travel and
leisure sector assets as consumer disposable income increases in places like
China and India and baby boomers here shift to the leisure part of their lives,"
The deal was praised by hotel workers union UNITE HERE.
"We enjoy a positive partnership with Hilton Hotels," union president Bruce
"Blackstone has demonstrated its commitment to fair treatment for thousands
of hotel workers in several major markets," he added. "This combination is good
news for the workers of what will be the largest hotel owner in the world."
Socialite Paris Hilton's grandfather, Barron Hilton, is co-chairman of the
board with Bollenbach and owns 5.3 percent of Hilton Hotels' outstanding shares,
according to the company's latest proxy statement.
Hilton's stake consists of 20.5 million shares owned by the William B. Hilton
Trust, of which Barron Hilton is a trustee, according to the proxy.
Hilton shares rose $2.18, or 6.4 percent, to $36.05 Tuesday in trading
shortened ahead of the July Fourth holiday.
Blackstone shares rose 45 cents, or 1.5 percent, to $29.72. The buyout shop
sold a stake in its management partnership in an initial public offering late