Blackstone Panics And Buys Hilton for $20 Billion

July 5, 2007 at 3:52 pm  ·  Category: Market Commentary, Private Equity

Don’t congratulate me when I buy something.  Congratulate me when I sell it.”

– KKR Founder Henry Kravis, quoted by Bill Seidman, CNBC Chief Commentator, on CNBC this morning in response to a question I sent him (video – my question is read around the 3:00 minute mark)

After coming public at $31 a share on Friday June 22 and closing around $35 that day, Blackstone Group’s share traded down every day last week closing at $29.27 – about 5.6% below the IPO price.

The stock finally got a bounce today on the announcement that Blackstone will be acquiring Hilton (subscription required). 

They’re paying a pretty penny, a 40% premium to Hilton’s closing price on Monday, and one has to wonder if this wasn’t done in response to the dismal performance post-IPO performance of their stock.  Alot of people have been scoffing at Blackstone for coming in at the top and being a poor investment.

Blackstone is paying 15 times Earnings Before Interest Taxes and Depreciation (EBITDA) and will have to raise around $20 billion at a time when investor appetite for this kind of debt appears to be drying up. 

In an article titled “Blackstone’s High Hilton Price Leaves Firm Little Room for Error” (subscription required) on WSJ.com today, BreakingViews had this to say about the deal: “The Hilton deal shows that Steve Schwarzman, Blackstone’s aggressive chief executive, hasn’t lost his daring.  But in this case his financial savvy, like Paris herself, is on probation.”

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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