Hilton selling Scandic to EQT for $1.1 billion

NEW YORK (Reuters) - Hilton Hotels Corp. HLT.N said on Friday it would sell its Scandic Hotel chain to private equity group EQT for about $1.1 billion as it seeks to reduce debt amid buoyant lodging valuations.

Lodging companies have been taking advantage of robust demand for hotel properties to trim their portfolios. On Thursday, Host Hotels & Resorts Inc. HST.N said it sold three Marriott hotels for $214 million.

Hilton said it agreed to sell Scandic, which operates mainly leased hotels, for about 10 times 12-month recurring earnings before interest, taxes, depreciation, and amortization

(EBITDA).

Leased hotels are generally considered less attractive than owned properties because companies in effect buy a rent payment rather than real estate. Of Scandic's 132 hotels, 121 are leased.

"This a great price," said Smedes Rose, an analyst with Calyon Securities, who said leased portfolios might be expected to fetch eight to nine times EBITDA. "There's still a lot of interest in lodging assets."

Hotel operators have been enjoying a multiyear boom. Strong demand and few new hotels have allowed hotel operators to steadily raise rates.

EARNINGS HIT

Hilton Hotels is targeting an investment grade credit rating after taking on debt to buy Hilton International in February 2006 in a $6 billion deal. Scandic came as part of the Hilton International deal and was put up for sale in August.