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Hotels and motels

Hilton Hotels Corporation to Acquire Hilton International for $5.71 Billion

Strategic Insights

— 1 min read

Hilton Hotels Corporation (NYSE: HLT) has agreed to acquire the lodging assets of Hilton Group plc, known as Hilton International, for approximately $5.71 billion in an all-cash transaction. This transaction marks the final step in a strategic alliance between the two companies that began in 1997. The acquisition will make Hilton Hotels Corporation the largest and most geographically diverse lodging company in the world, with nearly 2,800 hotels and 475,000 rooms in 80 countries.

Key Takeaways:

  • The transaction is valued at approximately $5.71 billion, with a purchase price multiple of 11.3 times pro forma 2006 Adjusted EBITDA.
  • The acquisition assumes a USD/GBP exchange rate of $1.73:GBP 1, which may change depending on the exchange rate at closing.
  • Hilton Hotels Corporation will acquire 40 hotel properties, 200 leased properties, 160 fee contracts, and 80 LivingWell Health Clubs from Hilton International.
  • The company will also acquire full ownership of Hilton HHonors Worldwide and Hilton Reservations Worldwide, which have been 50/50 joint ventures with Hilton International.
  • The combined entity is expected to have 2006 Adjusted EBITDA of approximately $1.7 billion and be accretive to Hilton Hotels Corporation's expected stand-alone 2006 earnings.
  • The transaction will be financed with cash on hand and a new bank facility led by Bank of America and UBS.
  • The combined company will be headquartered in Beverly Hills, California, with Stephen F. Bollenbach as co-chairman and chief executive officer.
  • The company anticipates significant growth opportunities for its worldwide system through franchise and management agreements.
  • Hilton Hotels Corporation expects to realize approximately $30 million in annual cost savings and a number of revenue-enhancing synergies from new opportunities to grow its brands on a global basis and the worldwide implementation of its proprietary "OnQ" technology system.

Statistics:

  • Total value of the acquisition: $5.71 billion
  • Purchase price multiple: 11.3 times pro forma 2006 Adjusted EBITDA
  • Number of hotels acquired: 40
  • Number of leased properties acquired: 200
  • Number of fee contracts acquired: 160
  • Number of LivingWell Health Clubs acquired: 80
  • Estimated 2006 Adjusted EBITDA: $1.7 billion
  • Financing led by: Bank of America and UBS
  • Number of hotels worldwide: nearly 2,800
  • Number of rooms worldwide: 475,000
  • Countries represented: 80

Sources:

  • Hilton Hotels Corporation Press Release, December 29, 2005
  • Hilton Group plc Press Release, December 29, 2005
  • Hilton Hotels Corporation Investor Presentation, December 29, 2005

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