Thursday, July 5, 2007
On Tuesday afternoon Hilton Hotels Corporation announced that it had agreed to be acquired by the The Blackstone Group's real estate and corporate private equity funds in an all-cash transaction valued at approximately $26 billion. The announcement date for the transaction was likely moved up due a potential leak of the deal and frenzied stock and call option trading on that day. As White Collar Crime Prof notes "[a]nother deal, another SEC insider trading investigation, in all likelihood."
The transaction is not contingent on the receipt of financing. Financing commitments have been provided by Bear Stearns, Bank of America, Deutsche Bank, Morgan Stanley and Goldman Sachs. Unlike many private equity deals today, the transaction does not contain a "go-shop". Rather, according to the merger agreement, Hilton can terminate the deal any time prior to a shareholder vote approving the offer to accept a superior proposal. If it does so, Hilton must pay a termination fee of $560 million and up to $7.5 million in Blackstone's expenses. This provision is not terribly unusual though in a private equity deal context may bring some protest over the lack of a go-shop and a full solicitation of buyers by the company. But, maybe this did happen. We will have to wait until the full history of transaction negotiations are described in the merger proxy before any definitive assessment.
According to Hilton's latest proxy statement, Barron Hilton currently owns 5.3% of the company through various trusts and is Co-Chairman of the board of directors. Mr. Hilton is grandfather to the infamous heiress Paris Hilton: there is no disclosure of the break-down of the trusts or what her cut is (NB. Blogging Stocks speculates it is $60 million). But proponents of inheritance taxes on redistributive justice and equality grounds take note. Her likely inheritance increased richly over the July 4th weekend.