July 3, 2007 10:44 pm

Blackstone buys Hilton Hotels for $26bn

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Blackstone on Tuesday bought Hilton Hotels Corporation for $26bn (£12.8bn), giving the private equity company the biggest hotel group in the world by number of properties.

The deal, at $47.50 a share, represents a 31.7 per cent premium on last night’s closing price of $36.05 and a 40 per cent premium on Hilton’s price at the start of trading yesterday. It is the biggest deal in the hotel sector.

The acquisition gives Blackstone, whose 2,800 hotels include brands such as Hilton, Doubletree, Embassy Suites, Hampton Inn, Homewood Suites and The Waldorf-Astoria Collection, just under 500,000 hotel rooms.

That is around 60,000 rooms behind Intercontinental Hotels Group, the global market leader by room numbers.

Blackstone, which in April sold Extended Stay America, a budget business hotel chain, to Lightstone, a real estate investment group, for $8bn, already had global assets totalling 100,000 rooms.

Jonathan Gray, senior managing director at Blackstone, has been the private equity group’s prime real estate buyer, sealing the largest real estate deal in the US with the February deal to buy Equity Office Properties Trust for $23bn plus $16bn in debt.

Blackstone’s other hotel assets include La Quinta, a 575-hotel chain, and LXR Luxury Resorts.

Hilton has announced plans to open 1,000 more hotels outside North America in the next 10 years, as global demand continues to outstrip supply.

Hilton’s board met in Beverly Hills to sign off on a deal that will take the US-listed company private. One adviser close to the deal said it had been put together very recently and was expected to be completed by the end of the year.

The deal comes two years after Hilton Hotels Corporation merged with Hilton International, its sister company in the UK, in a $6bn deal that split off Ladbrokes, the UK bookmaker, into a stand-alone company.

Hotel deals have quickened even faster this year compared with last year’s $70bn-plus estimated by Jones Lang LaSalle Hotels.

The Blackstone-Hilton deal means deals in the hotel sector so far this year have already outstripped last year’s total.

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