Opinion

Ben Walsh

How Blackstone made $8.5 billion from Hilton’s $6 billion increase in value

Ben Walsh
Dec 16, 2013 16:13 UTC

In July 2007, Blackstone took Hilton private for $26 billion. On Monday, Hilton IPO’d at $20 a share. Using the same measure to value the company as when Blackstone acquired it, Hilton’s enterprise value is now $32 billion. That’s $6 billion above Blackstone’s takeover price.So it’s a bit confusing to read that Blackstone has an made an $8.5 billion profit on its investment in Hilton.

Here’s how Blackstone, in Matt Levine’s words, “made more on Hilton, in dollar terms, than Hilton has made itself”.

Step 1: Acquire using some equity, and a lot more debt

Blackstone and its investors bought Hilton for $5.7 billion in equity. They also borrowed $13 billion and agreed to take on $7 billion of Hilton’s already existing debt. Equity plus debt minus cash held by the company, what’s called enterprise value, is how you get that $26 billion takeover cost.

This is the essence of the private equity model: buy a company with some equity, and a lot more debt; Blackstone owns the equity, and the lenders own the debt.

Step 2: Restructure, and survive some very bad years for the hotels business

Almost as soon as Blackstone bought Hilton, pretty much everything started going bad. First came the financial crisis, which arguably started one month after the acquisition. Then the hotel business tanked.

No, it’s not secret – a guide to Twitter’s confidential IPO filing

Ben Walsh
Sep 13, 2013 17:54 UTC

Twitter filed for an initial public offering: we know this because the company tweeted so, not because the registration documents, or the company’s financial disclosures, are publicly available. Twitter didn’t even have to tweet what it did: its not legally required to say that it has filed registration documents with the SEC (it did that voluntarily).

When did the process of filling IPO documents become confidential?

Here’s how the JOBS Act alters the IPO process:

    Its changes only apply to companies with less than $1 billion in annual revenue. Anything more, and the standard IPO process applies: registration documents, including a prospectus and financial details like revenue and profit, are public as soon they are filed with the SEC; and amended with increasing detail as the company gets closer to selling its shares.

    These companies (referred by the law as emerging growth companies) are allowed to file their IPO registration documents confidentially with the SEC.

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