Equity firm Blackstone to buy Hilton hotels

7 July, 2007: Hilton, one of the world’s most famous hotel groups, is being sold to private equity firm Blackstone of the United States in a deal worth $26 billion (£13 billion).

The Hilton hotel chain was founded in 1919 by Conrad Hilton, great-grandfather of US celebrity socialite and actress Paris Hilton.

Hilton has a number of brands, including Conrad Hotels & Resorts, Doubletree, Embassy Suites, Hampton Inn, and The Waldorf-Astoria Collection.

The $26-billion that the Blackstone Group is paying for Hilton is the biggest in a series of private equity offers for hotel companies. Under the terms of the agreed deal, Blackstone will pay just under £24 for each share in Hilton, one of the most prominent global hotel brand names, as well as take on debt.

Hilton stockholders will be paid $47.50 (£23.54) under the deal, which represents a premium of 40% on the hotel company’s closing share price on July 2, 2007.

Blackstone, which raised £2 billion in an IPO in June 2007, said it intends to invest in the Hilton properties and brands globally to grow the business.

The Hilton hotel chain is worth around £10.5 billion. In its January-March 2007 quarterly figures, the hotel revealed £3.5 billion in debt. Announcing the takeover agreement, which has been approved by Hilton’s board of directors, Blackstone said it intended to invest in the company’s properties in order to grow the business for the benefit of both shareholders and customers.

The private equity group already boasts a portfolio of over 100,000 hotel rooms across the United States and Europe, with its interests including the La Quinta Inns chain and LXR Luxury Resorts and Hotels.

The takeover deal, one of several offers made by private equity groups for hotel assets in 2007, is expected to be completed during the fourth quarter of 2007. Blackstone would pay Hilton a $660-million fee if the deal falls through, according to the hotel chain.

Under the agreement, Hilton could pay a $560-million fee if the acquisition is not consummated, according to a filing with the Securities and Exchange Commission. Hilton must pay Blackstone the termination fee if the chain terminates the proposed merger under some circumstances, including if its board determines it has received a superior proposal.

Hilton agreed to be acquired by Blackstone for $18.5 billion in cash and the assumption of $7.5 billion in debt.