Hilton shares rise 7.5 percent in trading debut


Christopher Nassetta, chief executive of Hilton Worldwide, attends the company’s initial public offering at the New York Stock Exchange Thursday. (Andrew Burton/Getty Images)
December 12, 2013

Hilton Worldwide’s shares rose 7.5 percent in its market debut Thursday, marking one of the largest initial public offerings of the year and raising $2.35 billion for the hotel chain.

While the broader market fell, Hilton’s stock teetered between $20 and $22 during the day before closing at $21.50 a share.

The McLean company has said it would use the money it raised by selling 117.6 million shares to pay down its $13 billion in debt. The haul of more than $2 billion is Wall Street’s second-largest IPO of the year.

Hilton’s chief executive, Christopher J. Nassetta, said the market reception was gratifying. “We’ve spent the past six years transforming the company from a little bit of a sleepy business to one that’s leading the industry, and that’s resonated with investors,” he said.

Hilton, which had originally planned to go public Friday, moved up its IPO to keep up with strong investor demand, Nassetta said. Since the bell-ringing rights at the New York Stock Exchange were already booked for Thursday, Nassetta said he will do it Friday morning. Hilton is also transforming the trading floor into a hotel: Plans call for bellmen — with luggage carts in tow — at every entrance, wait staff serving food on the trading floor, and traders wearing Hilton Worldwide bathrobes.


Shares of Hilton, which had been priced at $20, began trading at $21.30 Thursday morning. Within the first hour, shares had risen nearly 9 percent. (ANDREW GOMBERT/ EUROPEAN PRESSPHOTO AGENCY )

Hilton’s return to the New York Stock Exchange, where it trades under the symbol HLT, comes after six years of private equity ownership by Blackstone. The New York-based firm paid $26 billion in cash for the ailing hotelier in late 2007. Within weeks of the purchase, the economy had fallen into recession, and analysts wondered whether Blackstone had taken too risky a gamble.

But in the years since, the company has turned around the hotel chain, bringing in Nassetta as Hilton’s chief executive and investing in overseas markets. The company has more than 4,000 properties, ranging from the Hampton Inn & Suites to the Waldorf Astoria.

“This IPO is a great thing for Blackstone,” said Robert Spinna, principal at Park Bridge Financial. “When they bought Hilton in 2007, the timing was not ideal. But they played it well. They were able to put their money where their mouth is.”

Blackstone will continue to own roughly 75 percent of Hilton, and the firm will not receive any proceeds from Thursday’s IPO. Analysts say they expect the firm to sell off its remaining stake within the next three to five years.

The IPO comes at a time when both the stock market and hotel industry are faring particularly well. The Dow Jones industrial average and other market indexes have hit record highs this year, paving the way for a number of lucrative public offerings by companies such as Potbelly Sandwich Works and the Container Store. More than 200 companies have gone public this year, raising upward of $50 billion, making 2013 the most active year for IPOs since 2000, according to data from research firm Renaissance Capital.

“The unemployment rate is going down; corporate profits are at record levels. When you put all of these things together, the picture actually looks pretty positive for IPOs,” said Nikhil Bhalla, vice president of equity research at FBR Capital Markets in Arlington.

The hospitality industry, which took a big hit during the economic downturn, has also begun rebounding in recent quarters. As the economy continues to improve, analysts say they see several quarters of increased demand, which should bode well for large chains such as Hilton.

“The bottom line is, we’re at a stage in the hotel industry that is very attractive,” said Ryan Meliker, an analyst for MLV & Co. “As the economy continues to recover, you’ve got demand rapidly outpacing supply, which gives hotels even more of an advantage.”

Abha Bhattarai covers local banking, retail and hospitality for The Washington Post’s Capital Business section.
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