Biggest Hotel Deal in History, Blackstone

I about advantaged this blog: "'Paris Hilton, "Get a driver!'" 

Fresh out of a bastille afterwards confined 23 canicule of a 45-day bastille book for acquittal abuse afterward an awkward alternation of bashed active and active afterwards a authorization offenses, the abusive (now reformed) Paris Hilton should just get a driver. She may not accept to anguish about the amount anymore! Her Granddaddy's aggregation has just been awash for $26 billion, and his allotment is $990 million! 

REWIND. Instead, I absitively to go with my added accepted "hotel advocate and advisor" access and will advance with this: 

As if in a absolute apple re-enactment of the nursery beat about 10 little Indians (or the 1945 Agatha Christie cine "Until there were none" *), Blackstone arise today that it is affairs Hilton Hotels Corporation in a $26 billion deal. And in case you and Rip van Winkle accept just alive from your slumber, this accord is abandoned the latest in a continued cord of huge acquisitions by Blackstone abutting added $100 billion in the endure 5 years (including ESA/Extended Stay America for $8 billion, MeriStar for $2.6 billion, La Quinta for $3.4 billion, Wyndham for $3.2 billion, Boca Resorts for $1.25 billion) and by added clandestine disinterestedness players such as Morgan Stanley which afresh acquired CNL in a record-setting $6.6 billion abandoned a few months ago. 

What's so important about this acquisition? It portends and aberrant alliance of the accommodation industry with potentially amazing after-effects to auberge owners, guests, and added stakeholders in the accommodation industry. We will allocution about that shortly. It aswell provides added acceptance of the anticipation I fabricated a amount of months ago that "the absolute industry is now on the block." Let's yield a added attending at the data and background. 

Blackstone buys Hilton for "only" $26 billion -- THE BIGGEST HOTEL DEAL IN HISTORY. 

On July 3, 2007, Blackstone Group and Hilton Hotels Corp. arise the auction of Hilton to Blackstone for $26 billion. This is the better accretion of a auberge aggregation in history. 

Blackstone will pay Hilton stockholders about $47.50 for anniversary of their shares -- a 32% exceptional over the July 3, 2007 closing price. Barron Hilton, co-chairman of the aggregation and son of architect Conrad Hilton, will get about $990 actor for his 20.8 actor shares. Socialite Paris Hilton, afresh arise from bastille afterwards a 45-day book for acquittal violations apropos to bashed active and active afterwards a license, is Barron's granddaughter. She won't accept to drive herself anymore, nor do any added absoluteness TV shows. 

Founded 88 years ago with a individual acreage in Cisco, Texas and again the aboriginal "Hilton" in Dallas, Texas in 1925, Conrad Hilton took the aggregation accessible in 1946, bought the fabulous New York Waldorf=Astoria in 1949, and helped barrage the aggregation to its position today with added than 2,800 hotels and 480,000 auberge apartment worldwide. 

Key Hilton transactions. 

Hilton went accessible in 1946, but spun off Hilton International with all the adopted assets in 1964. And in 2006, afterwards a amount of parries and thrusts, through co-marketing and added arrangements, Hilton bought aback Hilton Group Plc for $5.71 billion, assuredly reuniting the Hilton cast worldwide. 

And in 1999, Hilton acquired Promus Auberge Corporation in a above industry accretion admired at $4.0 billion, that brought Hilton 1,700 hotels with 290,000 rooms, including the Doubletree, Hampton Inn, Red Lion and Embassy Suites brands. This analytical accretion brought Hilton to 1,900 hotels with about 350,000 apartment in 50 countries. Prior to the Promus acquisition, Hilton had abandoned 275 owned, managed or franchised hotels, including the New York Waldorf=Astoria, Waikiki's Hilton Hawaiian Village and Chicago's Palmer House. 

Size does not amount . . . at atomic in the auberge industry. What does the Hilton-Blackstone accord beggarly now? 

I in fact LOVE to say it: "I told you so." 

In my January 29, 2007 blog ("Size no best affairs . . . at atomic in the auberge industry. Is the absolute auberge industry now in play?") I fabricated a few observations, that I would like to anamnesis here. They are awful accordant to the Hilton-Blackstone buyout and, as a auberge advocate and advisor, they accent what I anticipate the Hilton-Blackstone transaction agency for the absolute auberge industry. Actuality is what I said on January 29 of this year: 

* The InterContinental Hotels Group is reportedly in play, and said that "even Hilton is now on the block." 

* I mused that "the CNL and EOP deals [are] the augury for the absolute auberge industry -- that every above auberge aggregation could be in play" (citing my ancillary January 29 blog about "Two deals that may change the abode apple forever") 

* I said, "Here's why admeasurement may no best appoint any absolute on acquisitions. . . and why Marriott, Hilton, Starwood, and all the added auberge companies could be up for grabs." And those affidavit are added accurate today (if possible) than in January. 

* John V. Arabia, a Principal of Green Street Advisors, one of the a lot of awful admired analysts accoutrement lodging, said that until recently, the beyond auberge companies, including both the ample auberge C-Corps and REITs, were about advised too big to be acquired by clandestine disinterestedness firms admitting their able absorption in the abode sector. 

* The Blackstone-EOP accord at about $40 billion was (in January) the better clandestine disinterestedness buyout in history. 

* By comparison, the better auberge C-Corps -- such as Starwood, Marriott and Hilton -- anniversary accept absolute action ethics alignment from "only" $18 to 30 billion, while Host Hotels, the better auberge REIT, has assets admired at about $20 billion. 

* While admeasurement may amount to some, admeasurement no best seems to be a bridle to demography the ample accessible auberge companies clandestine accustomed the flood of basic currently accepting aloft by clandestine disinterestedness firms. 

The $100 billion barrier is broken. 

Then in April, afterwards the Royal Bank of Scotland Group Plc arise its bid to buy ABN Amro Holdings for US$103 billion (76 billion euros), the blooming was torn on the fabulous "$100 billion barrier." Nothing was "too big" any more. (See, "Hotel Financing searching at a new criterion -- The $100 billion deal.") 

I acclaimed in my April 25, 2007 blog that no aggregation in the auberge industry is account added than the Disinterestedness Office accord completed beforehand this year. Although the Royal Bank of Scotland bid for ABN Amro does not absorb any hotels, adopting basic is something a article business -- it does not amount what the basic is for; the basic adopting apparatus has surpassed all the old limits. Annihilation could be next. And this accord is bigger that the absolute amount of the absolute auberge industry. 

Why are hotels so popular? 

OK. There are about absolute amounts of basic searching for a "home" or abode to invest. And the clandestine disinterestedness basic is now accepting put calm in amounts ahead unimaginable. So the clandestine disinterestedness guys could buy all the auberge companies if they basic to. But why would they bother? 

* The abbreviate acknowledgment is that the abode industry has accomplished almanac accumulation advance the accomplished three or four years, and cap ante -- although abreast celebrated lows for the accommodation industry -- still attending actual adorable compared to added absolute acreage types and added industries. 

* This agency that auberge companies and auberge backdrop arise to be a arrangement to clandestine disinterestedness investors. 

* John Arabia describes this as "the accepted abstract amid accessible and clandestine appraisement for auberge absolute estate." John addendum that on average, accessible auberge REITs accept afresh traded at high-single-digit to low-double-digit discounts to Net Asset Amount (NAV). That agency that private-market auberge buyers are accommodating to pay added for backdrop than institutional investors in accessible auberge REITs. That is acceptable to advance to added clandestine disinterestedness leveraged buyouts. 

* Beforehand this year, Christopher J. Nassetta, President and CEO of Host Hotels & Resorts, said it hardly differently. Commenting on the CNL and EOP transactions, he said, "There is a axiological conflict of valuations in accessible and clandestine markets. You are seeing transactional action that rationalizes this mismatch." 

So is anybody absolutely on the block? 

YES! YES! YES! 

What are the implications? 

There are a amount of important implications. What's a lot of important to you? 

* With her admirable ancestor accepting $990 actor from the deal, Paris Hilton apparently won't accept to advertise or mortgage her bequest to appoint a disciplinarian and abstain approaching bashed active accuse . . . if she gets annihilation from the acreage at all . . . but that is addition adventure . . . 

* Blackstone has gobbled up about $100 billion in auberge assets over the accomplished 5 years, and the blow of the auberge industry may be Blackstone's (or some added clandestine disinterestedness player's) arid . . . 

* China now owns Hilton (or at atomic abutting to 10% of the contempo Blackstone offering) . . . 

* Blackstone has acquired about $100 billion of auberge assets in the endure 5 years, including: 

o Hilton

o ESA

o MeriStar

o LaQuinta

o Boca 

* Added disinterestedness funds such as Morgan Stanley and Goldman Sachs assume to like accommodation too, with contempo acquisitions including CNL for $6.6 billion. 

* As I said in January, with ethics based on bazaar capitalization, there in no C-Corp auberge aggregation (Marriott, Hilton, Starwood, Hyatt, InterContinental . . . ) with a amount greater than $20-30 billion, and even Host Hotels, the better REIT has a bazaar cap of abandoned $20 billion or so. 

* WHAT HAPPENS WHEN ALL OF THE MAJOR HOTEL BRANDS ARE OWNED BY ONE OR TWO OWNERS? 

* Are the new owners absolutely continued appellation owners or just "financial wizards" accessible to annihilate and advertise the pieces? 

What does this all mean? 

The absorption affair is a big one. Will there be abandoned one or two auberge companies to accommodate your administration or authorization acceding with? Is there any antagonism to accumulate auberge ante fair for consumers? Will hotels be able to advance superior standards for their brands or will MBAs be application their HP calculators to actuate how abounding superior they can allow to bear for the investment? 

Have you noticed how auberge prices and ante assume to go up afterwards every billionaire or disinterestedness armamentarium buys it -- apparently to absolve the latest abandoned amount paid for the property? Accept you afraid about how the big buyers don't assume to advance any money to amend or advance the acreage area they just angled the rates? 

Dismantling the industry? But added than that, a lot of players accept claimed they were affairs a aggregation for "long appellation investment" -- as has Blackstone on the acquirement of Hilton. To some, this sounds like a archetypal car client purchasing a fine, best auto to own "forever", which he again dismantles to advertise by the allotment -- wheels, carburetor, awning ornament, doors, and the like -- section by piece. 

That's what some anticipate happened to Hilton's acquirement of Promus with the barter of Hiltons and Doubletrees, the advertise off of Red Lion and added "repositionings" or the dismantling of Wyndham by Blackstone afterwards its acquirement endure year. 

There will be lot added on this accord and these issues in the abreast future. The industry is in play. We accept heard rumors about Marriott, Starwood, InterContinental, Orient Express, Strategic Hotels, Host and a lot more. The industry still looks bargain to abounding capital. 

We will see how it plays out. 

This is Jim Butler, columnist of www.HotelLawBlog.com and auberge lawyer, signing off. We've done added than $40 billion of auberge affairs and added than 100 auberge mixed-used deals in the endure 5 years alone. Who's your auberge lawyer? 

* In the Agatha Christie classic, "Then there were none," 10 humans are arrive for a weekend on an island by a Mr U. N. Own, but he isn't on the island. At banquet a almanac is played, by which all the humans are accused of murder. Suddenly the aboriginal of them is dead, again the next... And just as it seems bright that that one of them is the murderer, that doubtable being is consistently the being murdered next. At endure abandoned two humans assume to be left. . . until . . .