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By: Michelle Grant

As anticipated, Hilton Worldwide filed a registration statement with the United States Securities and Exchange Commission for an initial public offering of shares on 12 September 2013.  The filing included an estimate of US$1.25 billion to be raised, which could change when the offering likely happens in the first quarter of 2014.

Download a sample of our company report, “Hilton Worldwide in Travel and Tourism

Hilton company swot analysis
 

Simply a financial manoeuvre for Blackstone

Blackstone is selling a small portion of Hilton Worldwide.  Sources have said that the company hopes that the stock market values Hilton at around US$30 billion, which implies that only 4.2% of Hilton will be sold.  In the filing, Blackstone stated it will retain control of the company and will use the proceeds of the sale to pay down debt with the remainder going towards “general corporate purposes.”  Additionally, Blackstone is trying to restructure US$13.5 billion of Hilton’s debt before the IPO.

Blackstone is blunt in the filing that Hilton is heavily indebted with exposure to variable interest rates and beholden to debt covenants that prevent the company from raising more debt or issuing dividends.  Given that Blackstone paid US$27.6 billion for Hilton in 2007 and Hilton may only be worth US$30 billion now, it seems that Blackstone is focusing on cleaning up the company’s balance sheet to help improve the overall value of the company before it cashes out entirely.  This focus probably means that Blackstone will continue to look to the management and franchise segment for growth since the segment has high margins with strong cash flow without the need for capital.  As a result, there aren’t likely to be any bold moves that require a lot of capital from Hilton, such as a new brand launch or acquisitions, in the short term.

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