Blackstone to Acquire Hilton Hotels for $26 Billion

http://dealbook.blogs.nytimes.com/2007/07/03/blackstone-fires-back-with-26-billion-deal-for-hilton/?ref=business

Blackstone to Acquire Hilton Hotels for $26 Billion
July 3, 2007

Blackstone Group announced Tuesday that it will pay $26 billion in cash for Hilton Hotels, in one of its biggest deals this year. The buyout firm will pay $47.50 a share for the hotel chain, a 40 percent premium to its closing price Monday.

With the purchase of Hilton, Blackstone will expand its burgeoning hotelier empire, adding names like the Waldorf=Astoria Hotel in midtown Manhattan to La Quinta Inns and Suites and LXR Luxury Resorts and Hotels.

Shares in Hilton surged in abbreviated trading Tuesday (and before the hotel chain made its announcement), closing up nearly 6.5 percent at $36.05. Shares in Blackstone closed at $29.70, up about 1.5 percent.

The purchase is Blackstone’s largest since it acquired Equity Office Properties Trust, the nation’s largest owner of office space, earlier this year. It also marks its largest acquisition in the United States since going public late last month.

It also throws some water on the news that Kohlberg Kravis Roberts, its archrival in the private equity industry, has filed for its own I.P.O. The two firms’ frosty relationship extends to their chief executives, Blackstone’s Stephen A. Schwarzman and K.K.R.’s Henry R. Kravis. The two have waged battles over both the size of their deals and extravagance of their social events.

In a statement, Hilton said that its board of directors approved the acquisition Tuesday and expects the deal to close by the fourth quarter this year.

Blackstone was advised by Bear Stearns, Bank of America, Deutsche Bank, Morgan Stanley and Goldman Sachs, all of which provided financing to the buyout firm as well. Simpson Thacher & Bartlett, the firm’s longtime outside counsel, served as its legal adviser.

Hilton was advised by UBS and Moelis Advisors, the boutique firm set up by Kenneth D. Moelis, UBS’ former president of investment banking. Sullivan & Cromwell served as legal adviser.