Hilton, Aramark return in highly anticipated IPOs

The hotel giant and the food service company started trading on the New York Stock Exchange Thursday.

By Forbes Digital Dec 12, 2013 2:06PM
Image: Stock market (© Zurbar/age fotostock)By Maggie McGrath, Forbes Staff

It's a big day for IPOs: hospitality company Hilton Worldwide (HLT) returns to the market along with Philadelphia food service company Aramark (ARMK). Both companies are listed on the New York Stock Exchange.

At 9:50 a.m. ET on Thursday morning, Aramark opened at $20.25, just 25 cents higher than its $20-per share pricing. Some 20 minutes later, Hilton opened at $21.30, over a dollar higher than its offering price.

Wednesday night, Hilton priced 117 million shares at $20 per share, the higher end of the previously announced $18- to $21-per-share range. Hilton raised nearly $2.4 billion in its IPO, a figure that ranks it as the second-largest IPO of 2013, according to research firm Renaissance Capital. Twitter (TWTR), arguably the most buzzed-about IPO of 2013, was bumped to fourth-largest of the year, with $1.82 billion in raised funds. Hilton's IPO size also ranks it as the largest IPO for a hotel chain.

The number of shares sold -- roughly 5 million more than the originally-stated 112 million for sale -- combined with the high price indicate a strong investor appetite for the hotel chain, which ranks as one of the largest hotel chains in the world. Hilton has 672,000 rooms at 4,080 properties, eclipsing publicly owned competitors Starwood Hotels and Resorts (HOT) and Marriott International (MAR), which have 345,000 and 670,000 rooms, respectively.

Hilton says that $1.25 billion of the $2.4 billion raised will be used to repay outstanding debt. In 2007, the hotel group was bought and taken private by Blackstone for $26 billion, $7 billion of which was Hilton’s debt. Blackstone will likely hold Hilton shares for years to come.

Underwriters on the IPO are Deutsche Bank, Goldman Sachs, Bank of America, Merrill Lynch, JP Morgan, Morgan Stanley and Wells Fargo.

The other big hospitality IPO of the day, Aramark, also priced its IPO Wednesday night. It is offering 36.3 million shares of common stock for $20 per share, coming in at the lower end of its planned $20 to $23 per-share range. This per-share price means the company raised $725 million in its IPO.

This is the third IPO for Aramark, which traded under the ticker "RMK" starting in 2001 but was taken private in 2006 by its chairman Joseph Neubauer and a group of private equity investors. Prior to trading under RMK, it was traded under the ticker "AMA" from 1960 to 1983.

On its website, Aramark is calling the day "a brand new day," and in a video message to customers and employees, CEO Eric Foss praised the company and talked about what the IPO means to the company. "We're beginning a journey that follows a strategic road map to better serve our clients, consumers and communities, and at the same time deliver the value our shareholders expect and rightly deserve," he said. "We believe in our brand -- a brand that defines what the service business is all about."

Goldman Sachs, J.P. Morgan, Credit Suisse and Morgan Stanley are acting as joint book-running managers for Aramark’s IPO.

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