Hilton Files for $1.2B IPO

MCLEAN, VA-Hilton Worldwide Holdings Inc., taken private by the Blackstone Group in a $25-billion 2007 deal, on Thursday filed a registration statement for a $1.25-billion IPO. Following the IPO, which would be the largest to date in the hotel sector, Blackstone would continue to own a majority of the voting power in Hilton.

In its SEC filing, McLean, VA-based Hilton cited a number of competitive strengths providing the foundation for its position as a leading global hospitality company. Among them are its brands, which have achieved an average global RevPAR index premium of 15% over the 12 months that ended June 30. Hilton also cites its scale: 4,041 properties and 665,667 rooms in 90 countries and territories, including a number of iconic properties with “significant underlying real estate value.”

The company also cites its “large and growing” loyal customer base, with members of its Hilton HHonors loyalty program contributing approximately 50% of the more than 170 million room nights recorded over the past 12 months. Membership in the HHonors program grew by 83% to nearly 38 million between year-end '07 and this past June 30.

Significant embedded growth is another strong suit, according to the SEC filing, driven in part by what are predicted to be strong industry fundamentals. PKF Hospitality Research predicts that lodging industry RevPAR in the US will grow 7.2% in 2014 and 8.1% in 2015; Hilton operates 78% of its properties in this country. There's also a development pipeline that would add 27% to the current room count.

Via that current room count, Hilton says its cash flow generation is strong. “We increased our cash flow from operating activities from $219 million for the year ended Dec. 31, 2008 to $1.1 billion for the year ended Dec. 31, 2012,” according to the IPO. “We believe that our focus on cash flow generation, the relatively low investment required to grow our management and franchise and timeshare segments, and our disciplined approach to capital allocation position us to maximize opportunities for profitability and growth while continuing to reduce our indebtedness over time.”

The filing comes on the heels of news that Blackstone is seeking to refinance all of Hilton's debt, with a $3.5-billion CMBS issue reportedly in the works. The IPO will be arranged by Deutsche Bank AG, Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley, all four of which are also involved in the upcoming CMBS issue, according to the Wall Street Journal.

Hilton says it plans to launch the IPO as soon as possible after the SEC declares the offering plan effective. To date, the largest IPO in the hospitality industry has been the $1-billion offering that Hyatt Hotels Corp. made in 2009.