NEW YORK (TheStreet) -- Blackstone Group (BX) is taking hotel operator Hilton Worldwide Holdings public in an IPO that is expected to raise up to $1.25 billion, according to a Thursday, Sept. 12, regulatory filing.McLean, Va.-based Hilton owns and franchises a portfolio of 4,041 hotels in 90 countries and territories. The company's brands include Waldorf Astoria, Conrad, DoubleTree, Embassy Suites, Hilton Garden Inn, Hampton Inn and Homewood Suites. An eventual exit from the hotel chain will be something of a turnaround story, since Blackstone took Hilton private in October 2007 in a leveraged buyout worth $26 billion, right before the end of the LBO boom and as the recession was beginning to get under way. Indeed, in 2008, the chain posted an operating loss of $4.5 billion. But with Blackstone at the helm, Hilton increased the number of its rooms by 34% or 170,000 rooms by June 2013 over the number it had in June 2007; grew the number of rooms in the development pipeline by 52% to 176,000 and increased the total number of rooms under construction by 121% to 92,000, according to the offering prospectus. The company posted 2012 adjusted Ebitda of $2 billion on revenue of $9.3 billion, up from adjusted Ebitda of $1.8 billion on revenue of $8.9 billion in 2011. The number of shares to be offered has not yet been fixed, nor did Blackstone indicate if it would sell shares. The filing does not disclose how many shares will be sold in the offering. It does not indicate how many shares Blackstone would sell in the offering either. Hilton said that proceeds would go toward paying down debt. As of the end of 2012, the company had long-term debt of $15.2 billion, down slightly from $16bn in 2011. However, given positive trends in the hospitality industry and the company's own efforts to streamline its operations, Hilton's initial public offering is expected to be welcomed with open arms. "Industry trends have been solid over the past several years, so the timing of the IPO is not surprising," said an industry source who did not want to be named.
In fact, according to industry intelligence firm PKF Hospitality Research, or revenue per available room in the U.S., where 78% of Hilton's rooms are located, will grow 7.2% in 2014 and 8.1% in 2015. "Hotel stocks are trading at more or less 12 times enterprise value to projected 2014 Ebitda. Hilton should be there or even higher given its positive evolution," the person said. Hilton is not the only hotel company Blackstone is expected to take public. In July, Charlotte, N.C.-based Extended Stay America Inc. filed for a $100 million IPO. Private equity firms Blackstone and Centerbridge Partners LP and hedge fund firm Paulson & Co. acquired Extended Stay out of bankruptcy in 2010 for $3.9 million. Deutsche Bank AG, Goldman, Sachs & Co. and JPMorgan are the joint bookrunners on that deal. IPO intelligence firm Renaissance Capital said the $100 million figure is likely a placeholder and that Extended Stay could raise between $500 million and $1 billion in the offering. So far this year, the performance of publicly traded hotel chains has been on an upward trend. Marriott International ( MAR) share price has increased 10.8%, Hyatt Hotels' ( H) is up 16.6% and Starwood Hotels & Resorts Worldwide's ( HOT) is up 15.9%. Deutsche Bank, Goldman Sachs & Co., Bank of America Merrill Lynch and Morgan Stanley are the joint bookrunners on Hilton's IPO. An exchange and ticker symbol for the public company have not yet been chosen. -- Written by Taina Rosa in New York