£10b Hilton deal will not be the last

12 July 2007 by
£10b Hilton deal will not be the last

The £10b private-equity takeover of Hilton Hotels Corporation will not be the last major takeover deal seen in the hotel sector this year, analysts have predicted.

The deal, approved by Hilton shareholders last week, will see US buyout firm Blackstone taking on more than 2,800 properties and 480,000 rooms in the Hilton family of brands.

By doing so, the company - owner of Center Parcs, restaurant group Tragus and Madame Tussauds Group in the UK - will become the world's largest hotelier, controlling about 600,000 rooms. It already owns hotel groups such as La Quinta, Wyndham and MeriStar Hospitality.

Chris Eddlestone, head of the leisure group at law firm Halliwells, said the Hilton deal reflected the strength of the hotel sector and its growing appeal to private-equity groups.

"Hotel real estate is valued differently from other property investments, meaning that a successful hotel can increase the value of its assets, even if yields are being squeezed across other sectors, such as offices or retail," he said. "This is particularly appealing to private-equity groups as effective management leads to an automatic increase in the value of the property assets."

Bjorn Hanson, hospitality and leisure consultant at advisory firm PricewaterhouseCoopers, predicted that there would be at least one further large hotel transaction and two or three medium-sized ones before the end of the year, with Blackstone still on the prowl.

Hilton chief executive Stephen Bollenbach has played down the lawsuit from a shareholder who is claiming investors should get more from the Blackstone sale than the $47.50-a-share offer. "In every transaction there are law firms that specialise in filing these suits in hopes of receiving a payment," Bollenbach said.

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By Daniel Thomas

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