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 |  Wall Street Journal -
Nov-05-2009Hyatt Hotels, Ancestry.com Climb Post-IPO(topic overview)
CONTENTS:
- Hyatt's stock gained $1.96, or 7.8 percent, to $26.96 in morning trading. (More...)
- The offering is structured so the Pritzker family would own 80 percent of Hyatt's Class B common stock, each share of which has 10 times the voting power of a Class A common share. (More...)
- According to Sunstone: The Company currently is in discussions with Massachusetts Mutual Life Insurance Company, to negotiate an amendment to a US$246.3 million, 5.95 percent non-recourse mortgage loan that matures in 2011. (More...)
- Sunstone already forfeited the W San Diego (California), as of 30 September 2009. (More...)
- Cisco said net income was down 19 percent from the year-ago period to $1.8 billion, or 30 cents per share. (More...)
- Hyatt's revenue for the first half of 2009 declined 18.5 percent from a year earlier, reflecting sluggish demand for hotels, especially from the corporate sector. (More...)
- A Hyatt spokesman declined to comment. (More...)
- "The timing probably isn't the best," said Morningstar hotel analyst Michelle Chang. (More...)
- The deal's early performance provided welcome relief during a rocky period for new U.S. stocks,. (More...)
- Initial share sales evaporated in the fourth quarter of last year after Lehman Brothers Holdings Inc. filed for bankruptcy and spurred a credit market freeze. (More...)
SOURCES
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Hyatt's stock gained $1.96, or 7.8 percent, to $26.96 in morning trading. The company, based in Chicago, raised $950 million in its initial public offering. It priced late Wednesday at $25 a piece, near the top end of the $23 to $26 range. The stock's upbeat trading is a welcome sight for the market, which has watched many IPOs fall short of expectations, including Dole Food Co. and AGA Medical Holdings Inc. Dole Food had priced its IPO at $12.50 per share last month, but the fruit and vegetable producer originally expected to price between $13 and $15 each. [1] NEW YORK, Nov 4 (Reuters) - Hyatt Hotels priced its initial public offering of 38 million shares at $25 per share on Wednesday, within its expected range.[2] NEW YORK (Reuters) - Hyatt Hotels Corp shares jumped 8 percent in their debut on the New York Stock Exchange Thursday, spurred by the hotel company's strong balance sheet and low valuation. The $950 million initial public offering of Chicago-based Hyatt is the second-largest on the NYSE this year, after Banco Santander.[3] In a massive show of confidence in the U.S. and global economy as it recovers from the worst recession in decades, Hyatt said it was offering 38 million shares at 25 dollars each for a total of 950 million dollars. The Chicago-based group, which is owned 85 percent by the wealthy Pritzker family, became the 18th company to launch an IPO on the New York Stock Exchange this year.[4]
Hyatt plans to sell 38 million shares for between $23 and $26 each under the ticker "H" ( H.N ) on the New York Stock Exchange.[5] Hyatt shares will start trading on Thursday under the ticker "H" ( H.N ) on the New York Stock Exchange. Chicago-based Hyatt had said it would sell its shares for between $23 and $26 each.[2]
NEW YORK — Shares of Hyatt Hotels Corp. traded higher Thursday in the iconic hotel chain's first day on the New York Stock Exchange, with investors appearing to dismiss concerns about infighting among its founder's heirs and tepid hotel reservations around the world.[1] NEW YORK (Reuters) - Shares of Hyatt Hotels Corp rose almost 8 percent in their debut on the New York Stock Exchange on Thursday, alongside an upswing in the broader market.[6]
NEW YORK — Leading U.S. group Hyatt Hotels began trading on the stock exchange Thursday raising almost a billion dollars with its initial public offering, in the New York bourse's second largest flotation this year.[4] NEW YORK, Nov 4 (Reuters) - Shares of Hyatt Hotels Corp will price on Wednesday and are set to start trading on Nov. 5, a day earlier than previously planned, according to some of the company's underwriters. The company had earlier intended for the pricing of shares for its initial public offering to take place Thursday and for the shares to start trading Nov. 6.[5] CHICAGO — There's talk of infighting among its founder's heirs and a sluggish appetite for hotel reservations around the globe. Hyatt Hotels Corp. shares are set to begin trading Thursday now that the company raised $950 million in its initial public offering.[7] Hyatt Hotels Corp., the hotel chain controlled by Chicago's Pritzker family, sold 38 million shares in an initial public offering at $25 each, at the higher end of its forecast range.[8] After pricing at the high end of the range of estimates, a valuation that some would consider rich. At 19 times trailing earnings, it's trading at a riper multiple than Marriott International (MAR) '- at about 17 times - and Starwood Hotels and Resorts (HOT), at 13 times.'' Richer still, because all the nearly $1 billion raised in the'debut offering of 38 million shares goes right into the pocket of the notoriously combative Pritzker family, which'controls the hotel operation. The Pritzker grip won't be loosened much with the public issuance.' It's strictly an economic event - one that benefits the family, chiefly -'without giving up control of the company: the family still owns the Class B shares that come with super-voting rights.[9] Proceeds from the sale of the 38 million Class-A shares will go to the Pritzker family, which controls the company. The jump in Hyatt's stock was due in large part to its favorable pricing compared to its peers and its strong cash position, said Scott Sweet, a senior managing director at advisory firm IPO Boutique. Hyatt has $1.3 billion in cash, more than five times that of its rivals, Marriott International and Starwood Hotels & Resorts, combined.[3]
The proceeds of the IPO would go to the Pritzker family, which controls the company. If the IPO's underwriters, led by Goldman Sachs ( GS.N ), along with Deutsche Bank Securities ( DBKGn.DE ) and J.P. Morgan Securities ( JPM.N ) choose to exercise an option to buy another 5.7 million shares, those proceeds will go to Hyatt.[2]
Hyatt's climbing stock price Thursday might quell the fears of industry experts, who questioned whether investors would want to buy the 38 million shares Hyatt offered because of the company's issues. Among them are disputes between members of the wealthy and influential Pritzker family, the largest holders of Hyatt stock with an 85 percent stake.[1]
Hyatt, which was originally set to launch a $988 million deal for trading on Friday, is instead aiming for Thursday, with one analyst conjecturing that the hotel chain was trying to get the deal done ahead of the government's release of unemployment data Friday. Hyatt's offering of 38 million shares priced at $25 a share Wednesday, within its expected price range of $23 to $26.[10] Hyatt's most recent prospectus for the offering estimated a price of between $23 and $26 per share in an offering of 38 million shares.[11]
Hyatt sought $23 to $26 a share, an Oct. 30 regulatory filing showed. The hotel chain has been plagued with investor uncertainty about its offering in recent weeks.[8]
Hyatt's financial results have slumped during the economic downturn, with occupancy and room rates down throughout the hotel industry. Hyatt declined to comment, citing the quiet period surrounding its IPO. PlainsCapital is the second U.S. IPO in the past seven days to cite market conditions while halting its plans; last week, energy company AEI withdrew its offering after it cut its price and size in a bid to attract more investors. Though PlainsCapital had seen its provisions for loan losses climb in the past two years as the economy deteriorated, in the first three quarters of 2009 its net income rose on increased income from its mortgage unit, which was doing more refinancings and originations.[10] The IPO market showed signs of unease, with one company postponing its deal and Hyatt Hotel Corp. moving its debut one day earlier. Regional bank PlainsCapital Corp., which was scheduled to price its initial public offering Wednesday night and begin trading Thursday, postponed the deal because of market conditions.[10] Nov. 4--The pricing for Hyatt Hotels Corp.' s initial public offering, originally scheduled for Thursday, has been moved to today, according to IPO analyst Scott Sweet at IPO Boutique.[11] Hyatt Hotels Corp.' s initial public offering proved Thursday what every hotel operator knows: Even when the industry is full of vacancy signs, people will line up for a bargain rate. Despite its presence in a sector that is in the middle of an occupancy and rate slump, Hyatt's stock priced within its expected range and shot higher in its first hour.[12] The initial public offering of Chicago-based Hyatt priced at $25 a share Wednesday, within the expected range.[6]
The company's initial public offering of 38 million Class A shares would raise between $874 million and $988 million. The IPO's underwriters could choose to exercise their option to buy an additional 5.7 million shares.[11]
Hyatt has granted the underwriters a 30-day option to purchase up to an additional 5.7 million shares of Class A common stock. Hyatt priced its IPO at the top of the US$23-US$25 estimated range.[13] Hyatt Hotels Corporation priced 38 million shares at US$25 per share, raising US$950 million before the bell Thursday, MarketWatch reports.[13]
With 38 million shares in the deal, Hyatt will raise about $931 million if it prices at $24.50 a share.[14] Hyatt will likely price within its estimated range of $23 to $26, Sweet said. Earlier, he forecast a price of $21 a share, but he lifted his outlook on healthy interest now expected for the deal.[14]
Proceeds from the sale — which was priced late Wednesday at $25 each, near the top end of the $23 to $26 range — will go almost entirely to the family, who will remain in control of the company with about two-thirds of outstanding shares and three-quarters of the shareholder voting power.[7] Questions had lingered about whether investors would be confident enough to snatch up the 38 million shares -- priced at $25 each, near the top end of the $23 to $26 range -- that were offered.[15]
Questions had lingered about whether investors would feel confident enough to snatch up the 38 million shares of the iconic hotel chain that were offered.[7]
Hyatt operates hotels in 45 countries. Its shares, trading under the symbol of "H," rose sharply in early morning trading and by 1545 GMT were up 7.72 percent to 26.93 dollars.[4] Wall Street has done something that has proved very hard to do: make the famous fighting Pritzkers happy. Traders greeted the public debut of Hyatt Hotels (H), which garnered the distinction of the single-letter trading symbol, with'a warm embrace: the stock jumped as much as 12% in its first day of trading.[9] Hyatt's Class A common stock began trading on the New York Stock Exchange today under the symbol "H," a day earlier than scheduled.[13] Public trading under the symbol H is expected to begin on the New York Stock Exchange Thursday.[11]
Hyatt plans to trade on the New York Stock Exchange under the symbol H. Goldman Sachs (GS) is lead underwriter of the deal.[14]
The offering is structured so the Pritzker family would own 80 percent of Hyatt's Class B common stock, each share of which has 10 times the voting power of a Class A common share. [11] The family also has feuded over how Thomas Pritzker administered various family trusts and the dual class structure of Hyatt stock, which gives the family 10 votes per share.[7]
"Disputes. among Pritzker family members and the trustees of the Pritzker family trusts may result in significant distractions to our management, disrupt our business, have a negative effect on the trading price of our. common stock," Hyatt cautioned in a regulatory filing last month outlining a series of risks faced by the company when it become publicly traded. Executives also noted any such problems could heap negative publicity on Hyatt and the family.[7] Among the issues facing the company are disputes between members of the wealthy Pritzker family, the largest holders of Hyatt stock with an 85 percent stake in the Chicago company.[7]
Hyatt has a strong brand name and a low-debt balance sheet, but the entire lodging industry is in the midst of a slump because of the economic downturn. All the shares sold in the IPO come from its founding family, the Pritzkers, so none of the proceeds will benefit the company.[8] The full proceeds of the $931 million IPO will go to the Pritzker family, which controls the company.[5] Pritzker family stake in the company could dwindle as low as 15% without it relinquishing control of the company.[9]
Hyatt Hotels ( H ), a global upscale hotel operator and developer owned by the Pritzker family, is expected to go public this week.[16] "We are delighted at the success of our initial public offering and with our new partnership with the NYSE," said Mark Hoplamazian, chief executive officer of Hyatt Hotels Corporation, in a statement.[4] Chatham Lodging Trust plans to sell up to an estimated US$230 million in stock in an initial public offering for hotel acquisitions, according to The Wall Street Journal.[13]
Stocks to Watch Today is a daily blog about key stock and market movements, written by Barrons.com stocks columnist Bob O'Brien. O'Brien updates this blog and provides video reports several times each trading day offering unique insight and analysis. O'Brien is a 14-year veteran of Dow Jones & Co., having most recently worked at Wall Street Journal Television, where he appeared daily on CNBC under the Journal's content-sharing agreement with NBC. Prior to WSJ Television, O'Brien was an equities market reporter at Dow Jones Newswires.[9]
Hyatt shares surged to $27 in early trading alongside an upswing in the broader stock market.[3]
Net profit for the company's fiscal first quarter, which ended Sept. 30, increased 11 percent to $571 million, or 22 cents per share.[15] Discounts have helped occupancy stabilize, but profit, revenue and a key performance measure of revenue for each available room is down dramatically at the biggest chains. Hyatt said its revenue per available room sank 22 percent for the first nine months of the year while overall revenue fell 17 percent to $2.44 billion for the period ending Sept. 30. Its nine-month loss was $31 million, compared with a profit of $310 million last year.[7] Two of Hyatt's rivals -- Marriott International ( MAR.N ) ( MAR.N ) and Starwood Hotels & Resorts ( HOT.N ) -- have forecast revenue per available room declines of as much as 5 percent in 2010, suggesting that the U.S. hotel industry will not quickly rebound from the current recession.[2] For the week ending 31 October 2009, in year-over-year measurements, the U.S. hotel industry's occupancy fell 7.2 percent to end the week at 51.8 percent, average daily rate dropped 7.2 percent to US$98.99, and revenue per available room decreased 13.8 percent to US$51.28, according to Smith Travel Research.[13]
According to Sunstone: The Company currently is in discussions with Massachusetts Mutual Life Insurance Company, to negotiate an amendment to a US$246.3 million, 5.95 percent non-recourse mortgage loan that matures in 2011. The company elected not to make the 1 November debt service payment on this loan, which is expected to result in a default under this loan. This loan is currently secured by 11 of Sunstone's hotels, comprised of 2,587 rooms. Sunstone is seeking an amendment to the terms of this loan because it believes the present value of the hotels securing this loan is currently less than the outstanding principal amount of this loan. The company cannot provide any assurances it will be successful in its efforts to amend the terms of this loan. [13] Absent an amendment, the company might elect to surrender the hotels to the lender or cooperate with the lender's appointment of a receiver. The 11 hotels securing this loan had a net book value including goodwill of US$258.8 million at 30 September 2009.[13]
Sunstone already forfeited the W San Diego (California), as of 30 September 2009. It is considering the Marriott Ontario (California) and the Renaissance Westchester (New York) as other properties that could be turned over to lenders. Sunstone stopped paying on the debt of both hotels this fall. Lodgian, which released its earnings today, disclosed that its third-quarter loss was driven primarily by a US$34.2 million impairment charge largely related to seven hotels which are expected to be returned to their lenders. Private-equity firm Apollo Management is buying bonds in the debt-swamped Harrah's Entertainment so it has more power in the event of a debt restructuring, even if its large equity stake is wiped out, a New York Post story reports. [13] Highland Hospitality Corporation veterans James L. Francis and Douglas W. Vicari recently filed a prospectus seeking to raise US$460 million for a hotel REIT: Chesapeake Lodging Trust.[13]
Jon E. Bortz, who in September left REIT LaSalle Hotel Properties as CEO, is seeking to raise US$402.5 million in an IPO for Pebblebrook Hotel Trust, a Bethesda, Maryland-based REIT. Pebblebrook will seek to buy upscale hotels.[13] Along with the IPO, Chatham plans to sell in a private placement US$10 million in shares to Chief Executive Jeffrey Fisher.[13] The finicky IPO market has caused heartache for some companies who've been forced to price shares below expectations. Hyatt's shares priced slightly above the midpoint of its expected range.[7] The initial surge of Hyatt shares "instills some much-needed confidence back into an IPO market that has had three deals in one week postponed," Sweet said.[3]
Analysts had raised concerns about the level of control the Pritzkers plan to exert over the company by retaining the bulk of the voting rights. Hyatt warned in its prospectus that a disagreement among the Pritzkers could pressure shares. Sweet said investors had shelved those worries for the time being and "looked at the balance sheet."[3] Proceeds from the sale mostly are going to the family, who will remain in control of Hyatt with about two-thirds of outstanding shares and three-quarters of the voting power.[1]
Cisco said net income was down 19 percent from the year-ago period to $1.8 billion, or 30 cents per share. LOS ANGELES -- Media conglomerate News Corp. said its net income for its most recent quarter grew despite analysts' expectations of a decline, thanks to strength at its cable networks and movies unit and an improving market for local television ads. [15]
Reed Woodworth, a hotel industry analyst for PKF Consulting, says occupancy is down nationwide even as hotels have been cutting rates. "It's a particularly difficult time to be opening up a luxury, high-end hotel in an economy that we've had for the past year now," he says. Woodworth says the hotel companies remember that before the recession, consumers were willing to pay about $80 more to stay in these newer, cooler hotels that don't feel like a chain -- even though they are.[17] The W's room rates in Boston start at around $200. Hotel staffers wear designer outfits and no name tags, because they're just as cool as you. They'll get you anything you want -- as long as it's legal.[17] Big hotel chains like Hyatt, Marriott and Starwood are rolling out lines of specialty hotels. What most hotels call the lobby, the new W Boston hotel calls its "living room." Plunk down in one of the leather pods, and you can admire the polished granite floors by leaning back and seeing them reflected in the mirror on the ceiling.[17] W is part of a big hotel company called Starwood. This new location is the latest in a growing trend of so-called contemporary lifestyle hotels.[17]
Hyatt's revenue for the first half of 2009 declined 18.5 percent from a year earlier, reflecting sluggish demand for hotels, especially from the corporate sector. [2] Hyatt was founded in 1957 by Jay Pritzker and first taken public in 1962, but has been privately held for more than 25 years. It owns, operates, manages or franchises 415 Hyatt-branded properties, including the Hyatt, Park Hyatt, Hyatt Regency and Grand Hyatt chains, in 45 countries.[7]
A Hyatt spokesman declined to comment. On top of worries about the family, there's the recession that's kept hotel beds empty as both business and leisure travelers stay home. [7] Many hotel operators — particularly high-end hotels whose rooms used to command top dollar — have been reduced to slashing prices and offering amenities to lure guests to try to make up some of the business dropoff.[1]
The offering comes on the heels of the busiest two-month period for U.S. IPOs since December 2007 to January 2008, data compiled by Bloomberg show.[8]
The operator of 413 Hyatt-brand hotels raised about $950 million, according to Bloomberg data.[8] Expenses for owned and leased hotels decreased by $118 million in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008.[16] Consolidated revenues in the nine months ended September 30, 2009 decreased $508 million, or 17%, compared to the nine months ended September 30, 2008, including $60 million in net unfavorable currency effects and a $73 million decrease in other revenues from managed properties.[16]
The decrease was driven primarily by $149 million of cost reductions at comparable owned and leased hotels primarily attributable to reductions in compensation-related costs and other variable operating expenses, as we reduced our costs in response to declining hotel revenues.[16]
"The timing probably isn't the best," said Morningstar hotel analyst Michelle Chang. "I think it's more of a way for the family to sell some of their interest, rather than it being a strategic move for the company necessarily." [7] "Hyatt is a leading global brand and a welcome addition to our listed company family," said Duncan Niederauer, chief of NYSE Euronext.[4]
The deal's early performance provided welcome relief during a rocky period for new U.S. stocks,. [18] Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms.[5]
Initial share sales evaporated in the fourth quarter of last year after Lehman Brothers Holdings Inc. filed for bankruptcy and spurred a credit market freeze. [8]
SOURCES
1. The Associated Press: Hyatt Hotels rises from IPO price in debut on NYSE
2. UPDATE 1-Hyatt Hotels IPO priced at $25 per share | Deals | IPOs | Reuters
3. Hyatt shares jump in debut on NYSE | U.S. | Reuters
4. AFP: Hyatt launches on NY bourse in major IPO
5. UPDATE 1-Hyatt Hotels IPO pricing moved up - underwriters | Deals | IPOs | Reuters
6. Hyatt Shares Jump in Debut on NYSE - ABC News
7. The Associated Press: Hyatt Hotels raises $950 million in IPO
8. Hyatt Hotels IPO: 38 million shares at $25 each -- chicagotribune.com
9. Meet The Hyatt Family - Stocks To Watch Today - Barrons.com
10. Hyatt Moves Up Its IPO - WSJ.com
11. American Chronicle | BRIEF: Hyatt to price IPO today
12. Hyatt, Ancestry.com Climb in Stock Debut - WSJ.com
13. Hotel News Now | Hotels News - Article
14. CORRECT: Hyatt Hotels IPO On Deck For Thursday - Analyst
15. Hyatt IPO raises $950M; Cisco earnings sign of 'tipping point,' CEO says
16. Hyatt Hotels Hopes Investors Find IPO Inviting -- Seeking Alpha
17. Hotel Building Boom Focuses On Boutique Venues : NPR
18. UPDATE: Hyatt Hotels, Ancestry.com Climb Post-IPO - WSJ.com
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