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Buyouts usually don’t just happen. The Bev Hills-based hotel chain notes in its proxy that Blackstone had been sniffing around since last summer. That's when CEO Stephen Bollenbach, along with a representative of Hilton adviser UBS, met with Jonathan Gray, senior managing director of the private equity giant. Bollenbach seemed interested (why not, given that the stock was trading at a lower multiple than other lodging companies?). But then Blackstone's price came in: high $30s. Gulp. Hilton was looking for something in the $40s - plus the chance to search for competing offers - and after much back and forth, Blackstone said it wouldn't budge. That was that for many months - until May 15, when Gray came back to say that Blackstone would consider going beyond $40 a share.
More meetings. More back and forth. Blackstone would be willing to pay $45, but only if Hilton dropped its demand to solicit other bidders (unsolicited proposals were all right). Bollenbach said $45 wasn't enough - the company wanted $48 (around this time the stock was at $34). Blackstone held steady at $45. Lots more meetings. From the proxy:
On June 24, 2007, Mr. Gray communicated to a representative of our financial advisors that Blackstone would offer a price of $47.50 per share. Mr. Gray also indicated that the costs of any potential acquisition had increased significantly since Blackstone’s last offer due to worsening conditions in the credit markets. Mr. Gray also noted that the stock price of the Company’s common stock had decreased to $34.72 per share since the time of Blackstone’s last offer and that a price of $47.50 per share represented a substantial premium to the stockholders of the Company. A representative of our financial advisors informed Mr. Bollenbach of this offer and discussed the impact of the credit markets and the possibility of an increase in the offer to $48 per share in the event the credit markets improved.
Yeah, right. That's like a company offering you a job for $50,000, with the promise of bumping it to $52,000 if its business improves. But apparently such assurances were good enough for Bollenbach to bring the offer to the board. By this time, the guy was obviously motivated to sell, and $47.50 was a 40 percent premium over what Blackstone offered last year.
On July 3, 2007, the board, together with the Company’s management and legal and financial advisors, met to review the proposed transaction. At the meeting, the Company’s board discussed various aspects of the proposed transaction, including the proposed merger consideration and the terms of the merger agreement. Sullivan & Cromwell presented a summary of the terms of the merger agreement and discussed various legal issues with the board. UBS reviewed with the board its financial analysis of the merger consideration of $47.50 per share and UBS delivered to our board its opinion, dated July 3, 2007, to the effect that, as of that date and based on and subject to the various assumptions, matters considered and limitations described in its opinion, the merger consideration of $47.50 per share to be received by the holders of Company common stock was fair, from a financial point of view, to such holders. After additional discussion on the proposed transaction, the board approved the merger, the terms of the merger agreement and the transactions contemplated thereby and determined to recommend adoption of the merger agreement to the stockholders of the Company.
Inquiring minds want to know if the current credit market woes might create any problems for Blackstone in making the deal happen. So far, no sign that Hilton is on the list of vulnerable financings.
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.