As private equity firms rush to cash in on their investments, the Blackstone Group is moving to sell one of the biggest companies to go private in recent years.
Hilton Worldwide, the hotel giant that Blackstone bought six years ago, has begun preparations for an initial public offering, people briefed on the matter said Wednesday. That includes hiring four banks â€" Deutsche Bank, Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley â€" to start the process.
An offering for Hilton, whose 550 properties range from Hampton Hotels to the Waldorf-Astoria in Midtown Manhattan, would probably be held in the first half of next year, one of these people said.
A Hilton spokesman declined to comment.
Private equity firms have been eager to sell their companies, either outright or through an initial offering, to take advantage of booming stock markets and generate realized profits for themselves and their limited partners.
That has served to bolster the financials of the alternative investment giants. Last month, Blackstone reported a tripling of its second-quarter profit thanks in part to cashing out of its investments. And on Wednesday, the Carlyle Group said that its quarterly profit jumped nearly fourfold, and distributable earnings rose 41 percent, again partly due to sales of its portfolio companies.
The markets have pushed up the value of assets so high, in fact, that some alternative investment firms have slowed down their core business of buying up companies to focus on selling their existing holdings.
Generating real profits from portfolio companies has also aided in private equity firms’ fund-raising efforts, with successful exits serving as helpful talking points with new and existing investors.
Blackstone has been among the more active sellers within the industry. In the second quarter alone, the investment firm held an I.P.O. for SeaWorld Entertainment, the home of Shamu the killer whale, and sold additional shares in companies like Nielsen Holdings, the media measurement giant. It is also working on a potential initial offering of a smaller hotel chain, La Quinta, a person briefed on that process said.
Still, Hilton will be one of the biggest divestitures by a private equity firm in the last several years. The company is now among Blackstone’s single biggest investments.
The hotel chain’s sale in the summer of 2007 for $26 billion was the last of the giant leveraged buyouts struck during the credit boom that ended later that year. It was also the biggest-ever takeover of a hotel company.
But the hotelier soon began to struggle amid the crashing markets for debt and commercial real estate. Business and leisure travel also dropped in 2008 and 2009. Blackstone soon began protracted negotiations with Hilton’s creditors. The buyout firm eventually reached a deal to cut its portfolio company’s debt by several billion dollars.
Hilton has since flourished, as the economy has rebounded and consumers have begun traveling again. Such is Hilton’s rebound that Blackstone’s chief executive, Stephen A. Schwarzman, spoke of the company’s 17 percent rise in pro forma earnings for the first half of the year during the private equity firm’s second-quarter earnings call.
Publicly traded hotel companies have also been performing well. Shares in both Starwood Hotels & Resorts Worldwide and in Hyatt Hotels have risen by more than 15 percent so far this year.
Blackstone executives said that more cash-out opportunities abounded for portfolio companies. The firm’s president, Hamilton E. James, told analysts during the second-quarter earnings call that possible ways to exit investments included more I.P.O.’s, outright sales and special dividend payments.
“We think that we’ll have plenty of exit options,†he said.
News of the banks’ hiring was reported earlier by The Wall Street Journal online.
