Blackstone Group Buys Hilton Hotels Corp.

The News: Blackstone Group, a New York-based private equity group, has acquired Hilton Hotels Corp. for $20.1 billion in cash. Hilton's portfolio of brands includes Doubletree, Embassy Suites, Hampton Inn, Hilton Garden Inn and the flagship Hilton chain, totaling 2,800 hotels and over 480,000 rooms worldwide.

Industry Impact: Blackstone Group has always been tightlipped, but not tight when it comes to spending. In just three years, the group, which over the years has amassed close to 3,700 hotel properties worldwide, has bought such commodities as La Quinta Inns & Suites and LXR Luxury Hotels & Resorts. Last year, it acquired Travelport, parent company of Orbitz and Galileo. The Hilton acquisition also represents a dramatic shift in the hotel industry: for the first time, a private equity group has control of one of the biggest publicly held U.S. hotel companies.

Making Sense of It All: Apparently, there were whispers that a deal of this magnitude was imminent. It's still shocking: Just a little over a year ago, Hilton paid more than $5 billion to reacquire its international arm, Hilton Group PLC. President and COO Matthew Hart, who, presently, is to take the reins at Hilton once current CEO Stephen Bollenbach steps down in January, made it clear the intention was to grow Hilton's select-service brands internationally, while also divesting much of its owned real estate and growing its newly formed Waldorf=Astoria collection. Now it's unclear whether Hart will even be with Hilton once the deal officially closes. Moreover, it signals that other hotel companies aren't immune to private takeover.

"At this point, we think everything remains in play, and we think other deals are likely," said Robert LaFleur, an analyst with Susquehanna Financial Group. While Marriott chief J.W. "Bill" Marriott has showed no inkling that he will sell, Starwood Hotels & Resorts, in flux since the resignation of CEO Steven Heyer in April, could be ripe for acquisition. Meanwhile, shares of InterContinental Hotels spiked on the news of Hilton's buyout. Earlier this year there too were rumblings of a private equity bid for InterContinental, which operates such brands as Holiday Inn and CrownePlaza. —David Eisen

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