LQ, an owner and operator of select-service hotels, plans to raise $725.4 million in its upcoming IPO.
LQ will offer 37.2 million shares at an expected price range of $15-$18 per share, aiming for a market value of $2.4 billion.
Given the strong list of underwriters, impressive investment from Blackstone, and new franchises opening, we rate this IPO a buy in its proposed range.
La Quinta Holdings Inc (NYSE:LQ), a Blackstone-backed owner and operator of select-service hotels, plans to raise $725.4 million in its upcoming IPO.
The Irving, Texas-based firm will offer 37.2 million shares at an expected price range of $15-$18 per share. If the IPO can reach the midpoint of that range at $16.5 per share, LQ will command a market value of $2.4 billion.
LQ filed on February 10, 2014.
Lead Underwriters: Morgan Stanley & Co LLC, JP Morgan Securities LLC
Underwriter: Blackstone Advisory Partners LP, BofA Merrill Lynch, Citigroup Global Markets Inc, Credit Suisse Securities (NYSE:USA) LLC, Deutsche Bank Securities Inc, EA Markets Securities LLC, Evercore Group LLC, Goldman Sachs & Co, JMP Securities LLC, Lebenthal & Co LLC, Loop Capital Markets LLC, Mischler Financial Group Inc, Raymond James and Associates Inc, RBC Capital Markets LLC, Samuel A. Ramirez & Company Inc, Stifel Nicolaus & Company Incorporated, Wells Fargo Securities LLC
A Varied Portfolio
LQ is an owner, operator and franchisor of select-service hotels under the La Quinta brand. The firm's hotels primarily serve the midscale and upper-midscale segments. As of December 31, 2013, the firm's portfolio included 834 hotels throughout the United States, Canada, and Mexico, for a total of 84,000 rooms. Of that portfolio, the firm owned and operated 357 hotels and franchised 477 hotels.
LQ has focused on expanding its portfolio over the past decade, and plans to continue with a pipeline of 187 franchised hotels as of December 31, 2013. Some 24% of the firm's hotels serve the upper-midscale segment, 59% serve the midscale segment, and 10% serve the economy segment.
LQ offers the following figures in its S-1 balance sheet for the year ended December 31, 2013:
Net Income: $2,521,000.00
Total Assets: $3,169,834,000.00
Total Liabilities: $2,864,581,000.00
Stockholders' Equity: $319,096,000.00
Blackstone acquired LQ in 2006, and has since aggressively pursued the expansion of the firm's hotel portfolio, investing hundreds of millions into the improvement of the firm's hotels. Since the acquisition, LQ has tripled its franchised hotels.
LQ primarily competes for customers and for locations with other select-service hotel brands; most of the firm's hotels operate in areas with multiple competitors. Some competitors have access to greater financial resources than LQ. Major select-service competitors include Comfort Inn (NYSE:CHH), Holiday Inn (NYSE:IHG), and Hampton (NYSE:HLT).
President and CEO Wayne B. Goldberg has served in his current positions since 2006. Mr. Goldberg previously served as LQ's Group Vice President of Operations, Senior Vice President of Operations, and Executive Vice President of Operations. Mr. Goldberg worked as COO of BridgeStreet Accommodations and in various roles at Red Roof Inns, Inc. He holds a B.A. in communications/business organizations from the University of Louisville.
Optimistic Conclusion For Investors
LQ has benefited heavily from Blackstone's investment and its renewed emphasis on expansion, and its pipeline of forthcoming franchises promises continued growth.
The firm is in the black, and its Blackstone-assembled leadership team should be able to continue to push LQ forward.
Though the hotel industry is highly competitive, LQ has proven its ability to attract customers and franchisees to its hotels over the past decade-as well as an impressive group of underwriters. We also suspect that strong name recognition will provide a boost to LQ's IPO.
Investors should strongly consider buying into LQ's upcoming IPO.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.