Blackstone leaves Hilton and earns $ 14 billion after an 11-year saga

Blackstone Group LP is finally leaving Hilton.

The hotel company's largest investor agreed to sell 15.8 million shares, valued at approximately $ 1.3 billion, the last of its [19659004] shares of Hilton Worldwide Holdings Inc. With the departure, Blackstone will earn about $ 14 billion in profits, which means that the company has more than tripled its initial investment.

The sale will put an end to an 11-year ups and downs relationship that ended up being the most … registered profitable private equity business. Blackstone took the hotel giant privately in 2007, with the real estate and private equity funds of the company and some co-investors providing $ 6.5 billion in capital. The firm then made the investment by approximately 70 percent during the financial crisis, then invested more money and restructured Hilton's debt before making the company public again in late 2013. Hilton's shares have since more than doubled its value.

Blackstone President Jonathan Gray, who until recently was head of the firm's real estate division and prepared the deal with Hilton, will remain president of the hotel company McLean, Virginia, headed by executive director Christopher Nbadetta, and he has no immediate plans to give up paper even with the sale of shares.

& # 39; Initially Difficult & # 39;

"Initially it was a very difficult investment, but Chris was an excellent leader," Gray said in an interview. "The sharp drop in revenues could have easily dissuaded us, but the continued commitment of the entire company paid off to a large extent, we saw a lot of blank space in Europe and China for this company, and our thesis remained united through of the crisis and that's what gave us confidence. "

The bet could have been very different. Blackstone began chasing Hilton in 2006, internally naming the transaction Project Murphy after actor Eddie Murphy, who starred in the 1984 film "Beverly Hills Cop." (Hilton was then based in Beverly Hills, California). The agreement, agreed in mid-2007 and funded by Bear Sterns, was leveraged by 80 percent. As a result of the crisis, global revenues fell by 20 percent and earnings before interest, taxes, depreciation and amortization fell by 40 percent in the first 18 months of Blackstone's ownership.

Read more: How Hilton became the best leveraged buyer ever [19659011] Following its restructuring and IPO, Hilton's performance as a publicly traded company has been driven by a number of factors, including growth organic. Under the management of Blackstone, the number of hotel rooms in its systems has almost doubled to 900,000, and there are 350,000 more in its portfolio. The company also launched new brands to attract more customers, including Curio, Tru, Canopy, Tapestry and Home2.

There have also been some lucrative real estate deals, including the sale of the Waldorf Astoria hotel in New York for $ 1.95 billion in 2015. Hilton also sought to create shareholder value through the spin-off of its own real estate unit, [19659012] Park Hotels & Resorts Inc., and its timeshare business, Hilton Grand Vacations Inc.

"Often, success in private equity is attributed to financial engineering, but the Hilton transaction shows that it's not the case, "Gray said.

Including its final sale of shares, Blackstone will have executed 12 separate transactions to gradually sell its Hilton stakes from 2014, including a 25 percent stake offer to HNA Group Co. in March 2017. The firm China, to combat deep indebtedness, recently sold its holdings. HNA made a profit of approximately [$19659018] $ 2 billion for its investment in Hilton, Bloomberg previously reported.

As part of the transaction announced on Friday, Hilton Worldwide plans to buy 1.25 million Blackstone shares. The shares were traded at $ 83.03 on Friday morning.

Longer term

Blackstone and its rival alternative badet managers have been accumulating more and more long-term capital for investments that can last up to two decades. But in retrospect, Gray believes the hotel company would not have found itself in a longer-term fund if one were available at that time.

"Our motto for Blackstone is to buy it, fix it, sell it, and Hilton really fell into that as a company that we felt we could transform," Gray said.

Although it is difficult to imagine that Blackstone can recreate the success he has had with Hilton, Gray is optimistic.

"I think that's the way it is." "You never know what the future will bring and we continue to identify large-scale transactions where there are opportunities to create value."


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