Blackstone Group to Buy Hilton for $26 Billion

LOS ANGELES -- U.S. private equity firm Blackstone Group said on Tuesday it would buy Hilton Hotels Corp. for about $26 billion cash, the richest deal in a series of recent private equity offers for hotel companies.

Under terms of the agreed deal, Blackstone will pay $47.50 for each Hilton share, a 32 percent premium over Tuesday's closing price. Ahead of the post-close announcement, shares of Hilton had risen 6.4 percent to close at $36.05 on the New York Stock Exchange.

Blackstone, which raised $4.1 billion in an IPO late last month, said it intends to invest in the Hilton properties and brands globally to grow the business.

The hotel industry is enjoying a multiyear boom as robust demand has allowed hoteliers to steadily raise rates. The upbeat market environment, supported by limited construction of new hotels, has made lodging assets hot commodities.

Blackstone already has a significant portfolio of hotel and resort properties that includes more than 100,000 hotel rooms in the United States and Europe. Its properties include La Quinta Inns and LXR Luxury Resorts and Hotels.

Story Continues Below

Hilton's brands include Hilton, Conrad Hotels & Resorts, Doubletree, Embassy Suites, Hampton Inn, Hilton Garden Inn, Hilton Grand Vacations, Homewood Suites by Hilton, and The Waldorf-Astoria Collection.

The deal is expected to close during the fourth quarter of 2007 and was approved by Hilton's board of directors on Tuesday, the company said.

Blackstone said it expects no significant divestitures as a result of the transaction.

So far this year, several private equity groups have made multibillion-dollar offers for hotel assets.

Last month, Goldman Sachs' real estate fund, Whitehall, said it would buy Equity Inns Inc, a mid-market hotel chain, in a deal worth $2.2 billion including assumed debt.

Legacy Hotels Real Estate Investment Trust, the biggest lodging REIT in Canada, said it was in talks with investment groups over a possible takeover and had received nonbinding offers valuing its equity at $1.36 billion.

In February, luxury hotel operator Four Seasons Hotels Inc agreed to a $3.37 billion takeover offer from a group that included Bill Gates' Cascade Investments LLC and Saudi Prince Alwaleed bin Talal.

Hilton said last month that it had a letter of understanding with Somerston Hotels UK Ltd to develop new hotels in the United Kingdom.

The hotel workers union UNITE HERE applauded the proposed deal, saying it enjoys a "positive partnership" with Hilton and that Blackstone "has demonstrated its commitment to fair treatment" for workers.

The Hilton chain was founded in 1919 by Conrad Hilton, the great-grandfather of U.S. celebrity socialite Paris Hilton.

Her grandfather Barron Hilton, the co-chairman of the Hilton board of directors, owns 5.3 percent of Hilton shares, according to the company's April proxy.

A Hilton Hotels Corp spokeswoman said she did not know whether other family members still owned individual holdings in the chain.

Blackstone shares closed up 45 cents at $29.72 on the New York Stock Exchange on Tuesday.

Editor's note:
Discover the Next Big Biotech Winners! Go Here Now
5 Recession-Proof Stocks to Buy Now
Special low price on Intelligent Options. 48 hours only.