The Real Deal New York

Blackstone’s overall profit from Hilton deal? A whopping $14B

Deal is most profitable leveraged buyout in history
May 18, 2018 06:00PM

The Hilton in Midtown and Jonathan Gray

Blackstone Group sold its remaining shares in Hilton Hotels, an 11-year investment that many questions at first but turned out to be the most profitable leveraged buyout in history.

Blackstone will realize a profit of $14 billion in total after agreeing to sell its remaining 15.8 million shares back to Hilton for $1.3 billion, Bloomberg News reported.

The private equity firm put up $6.5 billion in equity with co-investors in 2007 to take the hospitality company private. Blackstone then wrote down the investment by 70 percent amid the financial crisis and later put infused cash and restructured the company’s debt before taking it public again in late 2013.

Blackstone president Jonathan Gray said “this was initially a very difficult investment” and credited Hilton CEO Christopher Nassetta’s leadership.

“The steep revenue declines could have easily dissuaded us, but the continued commitment of the entire firm paid off in a big way,” Gray said. “We saw a ton of white space in Europe and China for this company, and our thesis held together through the crisis and that’s what gave us confidence.”

When Blackstone put the deal together in mid-2007, the acquisition was 80 percent leveraged with financing from Bear Stearns.

Hilton in 2015 sold the Waldorf Astoria hotel to Anbang Insurance Group for $1.95 billion, and later spun off other company units.

“Often, success in private equity is attributed to financial engineering, but the Hilton transaction shows that isn’t the case,” Gray said.

HNA Group in 2016 bought a 25 percent stake in Hilton from Blackstone for $6.5 billion. [Bloomberg] – Rich Bockmann