Hilton Hotels accepts Blackstone's $26bn bid

Blackstone Group late on Tuesday announced that it has entered into a definitive agreement with the world’s leading global hospitality company, Hilton Hotels Corporation, under which the group will acquire one of the largest U.S. hotel chains for about $26 billion, including debt.

Blackstone’s offer price to Hilton Hotels, i.e. $47.50 per share, is pitched at a 40 percent premium to hotel company’s closing price on Monday and 32 percent over the Tuesday close.

Although, the Blackstone/ Hilton merger deal has been approved by the HHC board, it still requires approval of Hilton's shareholders and other customary closing conditions as well.

"Our priority has always been to maximize shareholder value. Our Board of Directors concluded that this transaction provides compelling value for our shareholders with a significant premium," said Stephen F. Bollenbach, Hilton's CEO and co-chairman.

The deal, which includes the assumption of about $7.5 billion in debt, is expected to close in the fourth quarter of 2007.

Under the terms of the agreement, Blackstone will acquire all the outstanding common stock of Hiltons. "This transaction is about building the premier global hospitality business. We are committed to investing in the company and working with Hilton's outstanding owners and franchisees to continue to grow and enhance the business," said Jonathan Gray, senior managing director of Blackstone.

Barron Hilton, son of the international chain of business hotels’ founder Conrad Hilton, and also the co-chairman of the company, will get $990 million for his 20.8 million shares.

Barron is also the grandfather of socialite Paris Hilton. The 26-year-old willowy heiress to the Hilton hotel fortune recently been released from a Los Angeles County jail, after serving three weeks in the facility for violating probation in a drink-driving case.

Shares of Blackstone jumped 45 cents to $29.72, while Hilton shares surged $2.18, or 6.4 percent, to $36.05 in Tuesday’s composite trading on the New York Stock Exchange.

Hilton Hotels Corporation, which has been publicly traded for more than five decades, operates more than 2,800 hotels and 490,000 rooms in more than 80 countries and territories, including 150,000 team members worldwide.

Beverly Hills, California-based Hilton, the second-biggest U.S. chain behind Marriott International Inc., is also a consumer brand that also owns such storied hotels as the Waldorf-Astoria. New York's luxury Waldorf-Astoria hotel was purchased by Hilton in 1949. Hilton's 2006 net income jumped 24 percent to $572 million on revenue of $8.16 billion.

Blackstone, a New York City-based prominent private equity and investment management firm, is among those private-equity firms that are acquiring hotel companies to profit from their cash flow and real estate holdings.

Blackstone, which owns the La Quinta chain, currently operates more than 100,000 hotel rooms in the United States and Europe. Other Blackstone hotels include a group of luxury hotels like the Boca Raton Resort and Club in Florida and the Boulders Resort and Spa in Arizona.

Last month, Blackstone had issued the initial public offering (IPO) at price of 31 dollars per common unit with the total value at 4.1 billion dollars.