Hyatt files for billion dollar-plus IPO

Hotel chain operator Hyatt has made the filing necessary to make an initial public offering under the ticker "H" in the near future, according to Bloomberg News.

Hyatt has 413 properties on six continents with close to 120,000 rooms in all, and the offering could be worth up to $1.15 billion as the controlling Pritzker family and Goldman Sachs (GS) sell some or all of their stakes.

The potential IPO comes as the hotel industry is being hit hard by cutbacks in business travel and tourism, leading to an 11 percent decline in occupancy rates and a nearly 9 percent drop in room prices. In July, Marriott International (MAR) reported a 50 percent drop in adjusted operating income amid a 26.1 percent decline in revenue per available room, an important measure of a hotel's earnings.

Discussing the outlook for the hotel industry, Marriott Chief Operating Officer Arne Sorenson said, "Unfortunately we aren't yet seeing more corporate travelers and business meetings returning to our hotels. Instead, our mix of business remains skewed towards price-sensitive, leisure travelers."

In financial statements analyzed by DailyFinance, Hyatt reported earnings per share of 9 cents in the trailing twelve months, compared to EPS of 98 cents in 2007 and $1.20 in both 2006 and 2005. Adjusted EBITDA, an alternate measure of profitability that sometimes helps make better comparisons than GAAP earnings, was $210 million for the first six months of 2009, a 50 percent decline from the comparable period in 2008. Adjusted EBITDA peaked in 2007 at $710 million.

The present IPO market is tough, but one advantage Hyatt does have is its sound balance sheet. At the end of the most recent quarter, the company's long-term debt amounted to just one-eighth of its shareholders' equity, and there are no major maturities until 2011. Marriott, by comparison, has almost twice as much long-term debt as equity, although their major maturities do not begin until 2012.

Although no official price has been set, the prospectus suggests that Hyatt shares will sell at a substantial premium to tangible book value of $13.76 per share. Marriott, which does not have a positive net tangible book value, trades at 5.8x net book value, which includes intangible assets such as goodwill. Based on Hyatt's capital structure, the company could quickly rival Marriott in terms of market capitalization if shares price at $25, or about twice tangible book value.

James Cullen also edits and writes at He has no personal position in the stocks mentioned above.

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