Hilton Hotels, Penn Beaten Up for No Good Reason
Editor's note: "Bricks and Mortar" is a series of columns written by real estate reporter Nicholas Yulico meant to help TheStreet.com readers generate real estate and gaming-related stock ideas.
In a curious side effect of the stock market's shakeout this week, two companies that have already agreed to buyouts at hefty premiums have become screaming buys again.
In short, recent financing worries for the buyouts of DaimlerChrysler's (DCX) Chrysler Group and newspaper owner Tribune (TRB) have raised concerns that credit will be much harder to obtain for private-equity giants performing leveraged buyouts. Thus, risk arbitrage spreads are widening for buyout deals already in the hopper.But Hilton and Penn shouldn't run into trouble. Hilton, which agreed to a $47.50-a-share buyout by Blackstone Group (BX) earlier this month, has seen its stock fall over the past five trading days on fears about the debt markets. Hilton's stock recently was trading around $44, representing a 7.4% discount to offer price. The Hilton deal is expected to close in the fourth quarter. Assuming the transaction closes at the end of December, you're being offered an 18.7% annualized return to buy the stock today. One veteran real estate investment banker says there is zero chance of the Hilton deal not closing. Banks have fully committed to the financing, and even if they can't immediately sell the debt paper, they'll hold on to it in the short-run, the banker says. There also is "no risk" that Blackstone can't close, he says. Blackstone is in the midst of raising a fresh $10 billion real estate fund and recently sold of most of the assets from its mammoth purchase of Equity Office Properties.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV