Over the last several years, private equity deals were reasonably well thought-out and done at multiples that reflected some discipline.
The hotel business is notoriously cyclical. During the last recession, and in the wake of September 11th, Hilton's stock languished in the single-digits. Hotel industry fundamentals are robust right now, but we are very far along in the industry's upswing.
Blackstone is paying about 30 times earnings, and 15 times Ebitda (2008 estimates) - far above 10-year historical median valuations. Presumably, they will be leveraging up Hilton's already lousy balance sheet. I might also point out that, over the years, Hilton's return on invested capital has been decidedly mediocre.
Let's see... paying up -- and leveraging -- for a highly cyclical business, five years into an industry upturn. Doesn't sound like a great trade to me.
Maybe there are some terrific synergies with Blackstone's already vast hotel holdings. And maybe there are some valuable hidden assets on Hilton's balance sheet. I hope so for Blackstone's sake.