Blackstone & Hilton

Steve Schwarzman is reading my blog! Consider the evidence. Just a few days after I highlighted Hilton’s (HLT) performance over the past few years, Blackstone (BX) announces a $20 billion buyout of the hotel chain.
Coincidence? Not likely.
Here are some details:

Blackstone will pay $47.50 for each share, Hilton said in a statement. That’s 32 percent more than its closing price yesterday. Barron Hilton, the son of founder Conrad Hilton and co-chairman of the Beverly Hills, California-based company, will get $990 million for his 20.8 million shares.
The purchase is a record for the hotel industry. Blackstone, the owner of the La Quinta lodging chain, joins Apollo Management LP and Texas Pacific Group in targeting hotel companies for their cash flow and real estate. Worldwide, hotel acquisitions more than doubled in the first half of this year, to $81.4 billion.
“It’s a classic Blackstone play: the size, the asset class, the management and the brand,” said Michael Pralle, who ran General Electric Co.’s GE Real Estate unit, with $59 billion in assets, before resigning in June to pursue other interests.
Including the assumption of debt, the transaction totals $26 billion. Hilton, second in the U.S. to Marriott International Inc., has more than 2,800 locations.

What I find interesting is that going forward, the main mover of BX’s stock will probably be merger announcements, not earnings reports. I would also guess that the market will react negatively initially to most merger announcements from BX, not matter how favorable they are. That’s an unusual drive of a share price, but we may need to learn to expect it.

Posted by on July 5th, 2007 at 9:46 am


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