McLean-based Hilton files for IPO

After six years of private-equity ownership, Hilton Worldwide filed for an initial public offering Thursday, seeking to raise up to $1.25 billion.

The filing did not come as a surprise. In August, people familiar with the matter confirmed that the McLean-based hotel chain had tapped four banks to take the company public.

According to a filing with the Securities and Exchange Commission, the number of shares of the company’s common stock to be offered and the price range have not yet been determined. Private equity giant Blackstone Group is expected to retain controlling interest in the hotel chain.

Hilton Worldwide said it will use the proceeds from the initial public offering to pay down its debt and for general purposes.

In the first six months of 2013, Hilton had a profit of $189 million on revenue of $4.6 billion, according to the filing. As of June 30, 2013, the company had $15 billion in debt on its balance sheet.

“The timing is right for lodging companies to go public right now,” said Nikhil Bhalla, vice president of equity research at FBR Capital Markets in Arlington. “We’ve already seen a few years of sustained growth and [the industry] is posititoned for another several years of growth.”

Blackstone bought Hilton for $26 billion in cash in the midst of a buyout frenzy in the summer of 2007. The deal, struck on the eve of the financial crisis, suffered for years under a high debt load.

Blackstone paid a 40 percent premium over the stock price at the time, including assuming about $7.5 billion in debt. Many observers thought that the private equity firm had drastically overpaid for the hotel company, which began 94 years ago with a single property in Cisco, Tex.

Christopher J. Nassetta, who was tapped to be Hilton’s chief executive and has close ties to the Washington community, has been seeking to turn the company around for six years. He previously led Host Hotels & Resorts, based in Bethesda.

Nassetta moved hundreds of the company’s leaders from Beverly Hills, Calif., where Hilton had been headquartered since 1969, to its 11-story, 323,000-square-foot headquarters at Park Place II in Tysons Corner.

Hilton Worldwide’s line-up of brands includes more than 4,000 hotels accounting for more than 665,000 rooms as of June 30, 2013, according to the filing. The 100-year-old company operates in 90 countries and territories. There are more than 300,000 employees throughout the company, including about 7,400 employees in the Washington area.

In addition to its namesake Hilton, the company owns, manages or franchises hotels under brands such as Waldorf Astoria, Embassy Suites, Conrad Hotels & Resorts and Doubletree.

Morgan Stanley, Deutsche Bank, Bank of America and Goldman Sachs have been selected to oversee the public offering.

Abha Bhattarai covers local retail, hospitality and banking for The Washington Post. She has previously written for The New York Times, The Wall Street Journal, Reuters and the St. Petersburg (Fla.) Times.
Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade.

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