On Tuesday, Hilton Hotels Corp. agreed to an all-cash buyout from Blackstone in a $20.1 billion deal that would instantly make Blackstone the world's largest hotel owner.
The deal was valued at $26 billion including debt. Blackstone said it would combine cash from its real estate and corporate private equity funds to buy all outstanding Hilton shares for $47.50 each, a 32 percent premium over Tuesday's closing stock price.
After Hilton's board approved the terms, the company said the deal would close in the fourth quarter pending shareholder approval.
"Our priority has always been to maximize shareholder value. Our board of directors concluded that this transaction provides compelling value for our shareholders with a significant premium," Stephen F. Bollenbach, Hilton's co-chairman and chief executive, said in a statement.
Blackstone owns more than 100,000 hotel rooms in the United States and Europe, including La Quinta Inns and Suites as well as LXR Luxury Resorts and Hotels.
"It is hard to imagine a better strategic fit for us than Hilton with its world-class people, brands and network of hotels," said Jonathan Gray, senior managing director at Blackstone. "We are committed to investing in the company and working with Hilton's outstanding owners and franchisees to continue to grow and enhance the business."
Adding the Beverly Hills-based Hilton Hotels will bring an additional 2,800 hotels and 480,000 rooms in 76 countries and territories and includes such brands as Doubletree, Embassy Suites and Hampton Inn.
Some analysts said real estate could have been a consideration in the deal for Blackstone, a major owner of commercial properties. While Hilton franchises the majority of its hotels, the company owns some valuable real estate like the Waldorf-Astoria in New York.
Socialite Paris Hilton's grandfather, Barron Hilton, is co-chairman of the board with Bollenbach and owns 5.3 percent of Hilton Hotels' outstanding shares, according to the company's latest proxy statement.
The stake consists of 20.8 million shares owned by the William B. Hilton Trust, of which Barron Hilton is a trustee, according to the proxy. Those shares will be worth $990 million if the deal is approved by shareholders.
Blackstone said it intends to invest heavily in Hilton and does not foresee any significant divestitures.
Hilton recently announced that Matthew J. Hart, the company's president and chief operating officer, would succeed Bollenbach as president and CEO effective Jan. 1, 2008. It was unclear whether Hart would remain with the company after the acquisition.
"Blackstone likes the management here," Bollenbach told The Associated Press Tuesday. "Matt continues to be COO and our plans remain the same."