The midscale American hotel group La Quinta was listed on the Stock Exchange on Wednesday April 9, 2014 by Blackstone, raising 650 million dollars and valuing the company at close to 2.1 billion dollars. A look at the context of this new IPO of a hotel group.
The midscale American group La Quinta hit the stock market Wednesday April 9, 2014 (NYSE:LQ). Shares were offered at 17 dollars, valuing the group at 2.08 billion dollars, and allowing Blackstone to raise 650 million dollars (618 million in cash after deduction of fees related to the operation).
This new IPO follows other new listings of hotel groups such as Extended Stay of America then Hilton during the last year. In a context where valuations on securities markets were high, particularly because of the "Quantitative Easing" politics of the major Central Banks, while company results continued to be penalized by the global economic context but benefited from prospects for improvement (particularly in the United States) that are generally appreciated on the Stock Exchange, the timing seemed right for Blackstone to make IPOs. These make it possible to raise capital and offer at least a partial "exit" for investment funds and private equity.
Nonetheless this new introduction does not appear to have been realized at as high a valuation as originally hoped: while an initial introductory window of 18 to 21 dollars had been suggested for La Quinta at the end of March, ambitions were finally revised downward to 17 dollars per action for the final introduction. Also, Blackstone had previously unsuccessfully studied a complete exit (see our article), mandating bank council meetings for a listing twice as high as the global business value (2.08 billion dollars) that was finally retained by the markets through this IPO. Initial ambitions for the hotel group's valuation were thus lowered and the hotel group was introduced partially (rather than by 1/3 of the floating capital) rather than being sold off completely. Blackstone thus maintains control over the group.
It is not surprising that the initial drop in the value of shares a few minutes after listing led some Wall Street analysts to question if IPOs are still as well received by the market today. But after an initial drop, the share recovered and closed at $17.12, up slightly (+0.71%, versus +1.11% for the Dow Jones IA), validating the corporate value initially established.
At 2.08 billion dollars, the group's valuation is lower than when it was acquired by Blackstone in 2006 at $2.3 billion with a takeover of liabilities for $800 million. But beyond appearances, it must be remembered that the growth of the chain (whose supply doubled on the period) took place mostly through franchise, while like other groups, strategies for sale of owned assets could feed cash flows and thus global return on investment.
This new IPO follows other new listings of hotel groups such as Extended Stay of America then Hilton during the last year. In a context where valuations on securities markets were high, particularly because of the "Quantitative Easing" politics of the major Central Banks, while company results continued to be penalized by the global economic context but benefited from prospects for improvement (particularly in the United States) that are generally appreciated on the Stock Exchange, the timing seemed right for Blackstone to make IPOs. These make it possible to raise capital and offer at least a partial "exit" for investment funds and private equity.
Nonetheless this new introduction does not appear to have been realized at as high a valuation as originally hoped: while an initial introductory window of 18 to 21 dollars had been suggested for La Quinta at the end of March, ambitions were finally revised downward to 17 dollars per action for the final introduction. Also, Blackstone had previously unsuccessfully studied a complete exit (see our article), mandating bank council meetings for a listing twice as high as the global business value (2.08 billion dollars) that was finally retained by the markets through this IPO. Initial ambitions for the hotel group's valuation were thus lowered and the hotel group was introduced partially (rather than by 1/3 of the floating capital) rather than being sold off completely. Blackstone thus maintains control over the group.
It is not surprising that the initial drop in the value of shares a few minutes after listing led some Wall Street analysts to question if IPOs are still as well received by the market today. But after an initial drop, the share recovered and closed at $17.12, up slightly (+0.71%, versus +1.11% for the Dow Jones IA), validating the corporate value initially established.
At 2.08 billion dollars, the group's valuation is lower than when it was acquired by Blackstone in 2006 at $2.3 billion with a takeover of liabilities for $800 million. But beyond appearances, it must be remembered that the growth of the chain (whose supply doubled on the period) took place mostly through franchise, while like other groups, strategies for sale of owned assets could feed cash flows and thus global return on investment.
United-States
