As private equity firms rush to cash in on their investments,the Blackstone Group is moving to sell one of the biggest companies to go private in recent years.
Hilton Worldwide, the hotel giant that Blackstone bought six years ago, has begun preparations for an initial public offering, people briefed on the matter said on Wednesday. That includes hiring four banks - Deutsche Bank, Goldman Sachs,Bank of America Merrill Lynch and Morgan Stanley - to start the process.
An offering for Hilton, whose more than 4,000 properties are as diverse as Hampton Hotels and the Waldorf-Astoria in Midown Manhattan, would probably be in the first half of next year, one of these people said.
A Hilton spokesman declined to comment.
Private equity firms have been eager to sell their companies, either outright or through an initial offering, to take advantage of booming stock markets and generate realized profits for themselves and their limited partners.
That has served to bolster the financials of the alternative investment giants. Last month, Blackstone reported a tripling of its second-quarter profit thanks in part to cashing out of its investments. And Wednesday, the Carlyle Group said its quarterly profit jumped nearly fourfold, and distributable earnings rose 41 percent, again partly to sales of its portfolio companies.
The markets have pushed up the value of assets so high, in fact, that some alternative investment firms have slowed down their core business of buying up companies to focus on selling their existing holdings.
David Fuller's view This is consistent
with a powerful, albeit somewhat volatile bull market cycle which commenced
on Wall Street in March 2009. Helped by the mother of all monetary tailwinds,
valuations have moved considerably higher this year. The monetary stimulus around
the world has yet to diminish but it would require considerable optimism to
extrapolate this strong stock market performance for the duration of 2013 and
into next year.
Blackstone and other private equity firms are understandably eager to book profits, as are investment banks and a number of other large institutional investors. Those who wish to stay fully invested while monetary policy remains so favourable have been shifting some funds out of the more expensive markets and into recovery laggards such as Europe. They are also increasingly buying cyclical sectors such as resources producers, which are traditionally late performers in bull market cycles.
We can see this with recent relative strength of Central to Northern European indices such as Belgium, France, German Mid-Cap, German TecDax, Ireland, The Netherlands, Denmark, Norway, Sweden, and FTSE SmallCap. Even some of the Southern indices led by Spain are beginning to perform.
Among the primarily resources producers, the Middle East shows some relative strength leaders such as Kuwait, Qatar, Saudi Arabia and Abu Dhabi. Also, Dubai which is not a resources exporter, although it benefits from strength elsewhere in the Middle East. Even some of Africa's mainly resources producers are also performing, as we can see with Ghana and Nigeria.
Many of these are now somewhat overextended momentum plays but clear downward dynamics are required to signal at least some mean reversion towards their rising 200-day moving averages.
Lastly, some leading individual miners such as BHP Billiton and Rio Tinto are beginning to perform. Among gold mines, shares such as Randgold Resources, also mentioned by Eoin yesterday, look as if they are beginning to bottom out.