With La Quinta Holdings moving toward an initial public offering, its parent, the Blackstone Group, has shown that it’s still an eager seller.
Private equity firms have been seizing on booming stock markets to cash out of their investments, particularly through I.P.O.’s.
Blackstone has been an active seller. Last year alone, the firm took public a half-dozen portfolio companies:
- Hilton Worldwde, the hotel giant
- SeaWorld Entertainment
- Merlin Entertainments, the owner of Madame Tussauds and the London Eye
- Extended Stay America, another hotel chain
- Pinnacle Foods, the owner of the Birds Eye frozen food brand
- Brixmor, a shopping center operator
On Blackstone’s earnings call with analysts two weeks ago, Stephen A. Schwarzman, the firm’s co-founder and chief executive, said that rising valuations have made buyers wary. But the private equity shop is betting that as markets stabilize, would-be acquirers will be more confident in striking deals.
Here’s more from Mr. Schwarzman’s comments, according to a transcript by Standard & Poor’s Capital IQ (Mr. Schwarzman refers to Hamilton E. James, Blackstone’s president, known as Tony):
We’ll be seeing more strategic exits, although, as Tony mentioned, when we often put companies up for sale, it’s called the dual track. And if the stock market looks better and the strategic buyers don’t show up, that’s fine. We can make plenty of money. So if you’re asking us to predict what’s going to happen, one, it’s a little hard to do. But on the margin, I think we both bet that there’ll be more of a pick-up in M&A activity, and it’ll provide us with options to sell businesses. But we’re … happy either way in that sense because if we take it public and we own the company, and the companies do really well and they continue to grow, we ultimately make a bunch of money for our investors that way, too. So it’s not that we have to go one way or another.
Indeed, Blackstone explored a sale of La Quinta last year, in what Mr. Schwarzman called a dual-track process. But it is betting that an I.P.O. will yield a bigger return.
According to the hotel chain’s prospectus, the company reported $673.4 million in revenue for the first nine months of 2013, up 6.8 percent from the prior year. Its adjusted earnings before interest, taxes, depreciation and amortization â€" which strips out a number of accounting charges â€" rose 6.7 percent during the same period, to $256.2 million.
La Quinta’s prospectus included a placeholder fundraising target of $100 million. It listed JPMorgan Chase and Morgan Stanley as lead underwriters.
