Hilton prices IPO at $20 a share

The offering could become the second-biggest this year if underwriters exercise an option to buy more shares.

By MSN Money Partner Dec 11, 2013 4:03PM
Hilton Hotel, Midtown in New York
© Andrew Kelly/ReutersUpdated 5:05 p.m. ET

By Matt Jarzemsky, The Wall Street Journal

Shareholders are about to get a chance to check in to hotelier Hilton Worldwide Holdings.


The McLean, Va., hotel chain’s initial public offering priced at $20 a share late Wednesday. Hilton and some existing shareholders expect to sell 112.8 million shares. 


The shares would begin trading on the New York Stock Exchange Thursday under the symbol "HLT."


If underwriters exercise an option to buy additional shares, the company’s forecast puts the deal value at up to $2.7 billion, which would make it the second-biggest IPO this year.


Signs emerged during Hilton's IPO marketing "roadshow" that the deal has enjoyed healthy investor demand. Hilton's IPO pricing date was moved forward a day from original plans for Thursday, suggesting bankers have had no trouble filling their order books.


About 300 people attended an investor marketing lunch at New York's Waldorf Astoria hotel last week, according to an investor who attended an event. Representatives from Hilton's underwriting banks included Deutsche Bank Chief Executive of North America Jacques Brand and Goldman Sachs (GS) global head of equity capital markets Stephen Pierce, the person said.


Hilton is returning to the public market following private-equity firm Blackstone Group LP's 2007 leveraged buyout of the company for $25 billion in stock and debt.


Shortly thereafter, the company hired chief executive Christopher Nassetta from rival Host Hotels & Resorts (HST) and increased its emphasis on franchising the Hilton name to other hotel owners. The relatively low-cost franchise strategy, which involves renting out brand names, booking systems and other features of the business, helped Hilton grow into the world’s largest hotel company by rooms.


During the roadshow, the company and its bankers have emphasized cost-cutting efforts undertaken when Hilton was private and the economics of the less-capital-intensive franchise model, according to an investor who attended a small-group meeting with management.


Conditions in the hotel market have continued to improve along with the broader economy, large operators enjoying rising per-room revenue of late. For the nine months through Sept. 30, Hilton’s revenue rose 2.2% to $7.1 billion, according to a filing.


One big question for investors is how Hilton will address its hefty debt load, the legacy of Blackstone's highly leveraged acquisition at the height of the buyout boom. Hilton had about $15 billion in long-term debt at the start of the year. The company plans to use IPO proceeds to pay down some of its borrowings.


Deutsche Bank AG is leading the deal with Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley.


Telis Demos contributed to this article.


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