Blackstone, which raised $4.1 billion in an initial public offering late last month, said it intends to invest in the Hilton properties and brands globally to grow the business.
The hotel industry is enjoying a multiyear boom as robust demand has allowed hoteliers to steadily raise rates. The upbeat market environment, supported by limited construction of new hotels, has made lodging assets hot commodities.
Hilton is worth $20.1 billion, based on 424 million shares on a diluted basis at the end of March, at the price Blackstone is paying. Hilton reported more than $7 billion of debt during its January-March quarterly results.
A spokesman for Blackstone said the group was not revealing the debt and equity breakdown of the deal at this stage.
Many investors think the notoriously cyclical U.S. hotel industry has more room to grow and could provide risk-adjusted returns that outperform other asset classes, according to Thomas Callahan, an analyst with hospitality industry tracking firm PKF Consulting in San Francisco.
"The perspective is that the industry still has a few more good years left in this upturn that began -- depending on how you count it -- several years ago," Callahan said.
Blackstone already has a significant portfolio of hotel and resort properties that includes more than 100,000 hotel rooms in the United States and Europe. Its properties include La Quinta Inns and LXR Luxury Resorts and Hotels.
Hilton's brands include Hilton, Conrad Hotels & Resorts, Doubletree, Embassy Suites, Hampton Inn, Hilton Garden Inn, Hilton Grand Vacations, Homewood Suites by Hilton, and The Waldorf-Astoria Collection.
A Hot Sector
The Hilton chain was founded in 1919 by Conrad Hilton, the great-grandfather of U.S. celebrity socialite Paris Hilton.
Her grandfather Barron Hilton, co-chairman of the Hilton board of directors, owns 5.3% of Hilton shares, according to the company's April proxy. He is the brother of the late Conrad Nicholson Hilton Jr., called Nicky, who was the first husband of actress Elizabeth Taylor.