Clients of Ireland’s biggest stockbrokers, Davy, will be celebrating the flotation of hotel group Hilton Worldwide Holdings Inc (NYSE:HLT), in New York this week with a price of around €1.8 billion. Around 150 of its clients put $100 million into The Blackstone Group L.P. (NYSE:BX)’s buyout of Hilton Hotels in 2007 and, based on the latest pre-IPO valuations for the group, that stake could be worth more than twice that now.
A clean sheet
The Hilton flotation is the biggest hotel group flotation of all time and the second biggest flotation of 2013, just behind oil pipeline holding company Plains GP Holdings LP (NYSE:PAGP), which came in at €2.07 billion.
The Blackstone Group L.P. (NYSE:BX) privatized the debt-laden acquisition in one of the largest leveraged buyouts before the Lehman collapse and subsequent economic fall-out in 2008. The company underwent a major restructuring of its €13 billion debt and has grown impressively since with a 36% increase in open rooms and a 25% increase in EBIDTA for management. Franchising and further expansion, especially overseas are all paying dividends. Hilton Chief Executive Christopher Nassetta, has been key in turning the organization around, says Drew Babin, a senior lodging analyst at CBRE Clarion Securities:
“The things he talked about doing, he delivered on. Hilton has been doing massive things under the radar.”
At Jones Lang LaSalle, Arthur Adler, from the Hotels and Hospitality Group, says the experienced management team and potential for overseas growth should make it attractive to investors:
“They’re growing in Asia, South America and a lot of these emerging markets. The US is a very mature market. Offshore is still kind of nascent.”
Room to profit
But, even in the US, where Hilton has 78% of its rooms, RevPAR (Revenue Per Available Room), an industry standard measuring room rates has been growing steadily since 2010 and is forecast to grow 5.7% this year and 6% the year after.
Christopher Muller, a professor at Boston University’s School of Hospitality Administration, commented on the flotation:
“The Blackstone Group L.P. (NYSE:BX) has timed the Hilton IPO at the perfect market inflection points of increasing global consumer travel demand, daily room rates, and occupancy.”
Nassetta and other executives have been travelling around the country for the past week speaking to potential investors in the IPO. The tour appears to have paid off. The IPO has been advanced one day from Thursday to Wednesday, reflecting strong demand.
Blackstone seeking more green in Ireland
Investors would be advised to keep an eye on any further tie-ups between The Blackstone Group L.P. (NYSE:BX) and Davy Stockbrokers. The Hilton venture is just the latest in a number of successful partnerships between Ireland’s biggest stockbroker and the equity giant.
Davy’s clients benefited earlier this year after the $825 million flotation of US shopping center operator, Brixmor, and in the stock market debut of Extended Stay America last month, which grossed $565 million. Davy also invested in Facebook at an early stage.
The Blackstone Group L.P. (NYSE:BX) has been increasingly active in the Irish market, buying up the iconic Burlington Hotel in a prestigious area of Dublin with a bargain basement price tag of €67 million. The equity giant was also a bidder during the auction of semi-state energy firm, Bord Gais, before the process collapsed last month.