Steven Bollenbach

Beverly Hills, Calif.—In a late Tuesday announcement, Hilton Hotels Corp. entered into an agreement to be acquired by The Blackstone Group.

The deal, which is expected to close in the fourth quarter, is worth about $26 billion--Blackstone will acquire all outstanding common stock of Hilton for $47.50 per share.

Steven Bollenbach, co-chairman and c.e.o. (who is retiring at the end of the year and will be succeeded by Matthew Hart, current president and c.o.o.), said in a conference call the purchase price represents an excellent value for shareholders.

“Blackstone is a great buyer because they are a sophistocated real-estate player,” he said. Blackstone likes Hilton’s position, its high quality portfolio and global platform.

“They have a business that’s complementary to us,” Bollenbach said.

John Arabia, principal, Green Street Advisors, said the deal is beneficial for both players. Hilton brings the value of its operating systems and brands to Blackstone’s existing assets; and Blackstone’s resorts add value to Hilton’s portfolio, which has always been light in resorts.

When asked about the deal’s value for current Hilton Hotels Corp. owners and operators, Bollenbach said: “It’s great. We’re working with a group that is a big player in the business. They have some fine hotels, which presents an opportunity to integrate. They are interested in the company strategically.”

He said the high purchase price demonstrates Blackstone’s willingness to invest in the company, which will be a great opportunity for owners in the future.

Blackstone will add Hilton’s more than 2,800 hotels with about 480,000 guestrooms to its guestroom count of more than 100,000 that are represented by brands such as La Quinta Inns & Suites and LXR Luxury Hotels and Resorts.

Since 2004, Blackstone has acquired Extended Stay America (2004), Prime Hospitality Corp. (2004), Boca Resorts (2004), La Quinta Inns (2005), Wyndham International (2005), MeriStar Hospitality Corp. (2006) and Hospitality Europe B.V. (2006). The company has not held on to all of these assets.

Blackstone intends to retain Hilton’s management team, according to Bollenbach.

“Blackstone has a wonderful reputation for being fair and appreciative of management,” he said during the conference call, adding (with a laugh) that Blackstone sees the management as a big asset of the company, especially since he’ll be retiring at the end of the year.

And while Bollenbach said the company has had a great 60-year run as a public company, Blackstone recently issued its initial public offering of limited partnership interests for an estimated value of about $4.1 billion.

According to a joint press release, Blackstone does not plan to divest any of Hilton’s assets.

For more on the acquisition, see Hotel & Motel Management’s August issue.