The New York private equity firm on October 24 agreed to sell a roughly 25% stake in Hilton to Chinese conglomerate HNA Group for $ 6.5 billion, following a 60% rally in the company’s stock from an early-2016 low.
Including paper gains on its remaining 21% stake, Blackstone has made about $ 12 billion on Hilton, or three times the equity the firm’s funds put into the deal, according to a person familiar with the matter.
It wasn’t always clear Hilton would be such a success for Blackstone.
The firm bought Hilton for $ 18.5 billion in 2007, at the peak of the market before the financial crisis. Private equity firms have grappled with how to turn deals from that era into profitable investments, including the buyouts of the former TXU, Toys “R” Us, Univision Communications and Caesars Entertainment.
Nearly out of the gate, Hilton struggled with a collapse in business travel amid the worst recession in decades and the heavy debt load taken on to finance its buyout. By 2009, the firm had reduced the value of its investment 70%.
Blackstone helped Hilton recruit new management and aggressively expand its brand overseas, largely through management and franchise agreements. It also restructured Hilton’s debt – a deal that involved the firm putting another $ 800 million into the company, according to Wall Street Journal reports.
The turnaround positioned Hilton for an initial public offering in 2013. Over the next two years, roaring stock markets enabled Blackstone to sell $ 6.96 billion worth of Hilton stock for an average price of $ 25.78 a share, well above the $ 20 IPO price.
Hilton shares suffered during a market rout early in the year, hitting an all-time intraday low of $ 16.16 on Jan. 20. But they’ve recovered along with the broader market since then, offering Blackstone another opening to sell. Today, the company’s market value stands at about $ 22.7 billion.