PRT-IPO VIEW-Family feud, hotel weakness could hurt Hyatt

* Pritzkers' stake could keep investors at bay

* Hyatt brand name, valuation seen as pluses

* IPO comes as hotel revs down but lodging stocks rising (Repeating item that initially moved on Friday)

By Deepa Seetharaman

NEW YORK, Oct 30 (Reuters) - A family feud, an unusual blueprint for corporate governance and a global downturn in the hotel industry may test investors' appetite for shares of Hyatt Hotels Corp when it goes public this week.

The $931 million initial public offering for the hotel operator is by far the highest-profile deal slated for the coming week. Five other companies are also expected to debut in what could be the second-busiest week for IPOs this year.

Hyatt's foray into the public market comes at a time when lodging stocks are on the mend. Analysts said Hyatt's marquee name and solid balance sheet could drive the stock.

But interest could be sapped by Hyatt's dual-class ownership structure, which places control of the company firmly in the hands of the Pritzker family, which owns the company.

Investors may also be turned off by the Pritzkers' history of bitter infighting. In an Oct. 19 prospectus, Hyatt warned that another dust-up could hurt shares.

"There's a lot of potential issues, none of which on their own are huge, but all together would lead investors to question the motivation of the IPO and how much the shareholders' interest is represented," said Nick Einhorn, an analyst at Renaissance Capital, a Connecticut-based IPO research firm.

One issue is Hyatt's proposed corporate governance plan. After the IPO, the Pritzkers will own 62.4 percent of all outstanding shares and 80.7 percent of all Class-B shares. Each Class-A share is worth one vote, while each Class-B share is worth 10 votes.

The entire proceeds of the IPO are expected to go straight to the Pritzker family trust, Hyatt said in its latest prospectus. If the deal's underwriters exercise an option to buy more shares, that added capital will go to Hyatt.

"Hyatt's corporate governance structure is the worst in our entire coverage universe," Green Street Advisors lodging analyst John Arabia wrote in a research note last week.

Hyatt, which netted $3.8 billion in revenue in 2008, plans to sell 38 million Class-A shares, priced between $23 and $26, on Thursday. The shares are set to make their debut Friday on the New York Stock Exchange under the symbol "H" (H.N).

The deal's underwriters are led by Goldman Sachs & Co (GS.N), which has a 7.5 percent stake in Hyatt.

PRICED TO SELL

Talk of a Hyatt IPO has been percolating since 2002, when the Pritzkers said they reached a settlement to break up the $15 billion dollar empire, of which Hyatt is the crown jewel.

That year, Liesel Pritzker, a former child actress, and her brother Matthew sued their father Robert and other family members, accusing them of looting their trusts. The case was eventually settled in 2005.

Another argument in the future may prompt some family members to sell their stakes and dilute shares, said Scott Sweet, a senior managing director of IPO Boutique.

But Sweet and Einhorn both said the company's strength in the hotel industry may offset such concerns. Hyatt has nine times the cash of rival Marriott International Inc (MAR.N) and 11 times that of Starwood Hotels & Resorts Worldwide Inc (HOT.N).

Einhorn noted that Hyatt shares are relatively cheap compared with both Marriott and Starwood. Both stocks have risen amid signs of an economic recovery. Through Thursday, the Dow Jones U.S. hotels index was up 43 percent this year.

But the bulk of Hyatt's hotels fall under the upper-upscale segment that relies heavily on business demand, which has been hobbled by corporate cost-cutting in the past year. Hyatt's revenue for the first six months of 2009 fell 18.5 percent from a year earlier.

Further, Hyatt's offering comes as investor enthusiasm for IPOs has somewhat chilled. Last week, Dole Food Co Inc (DOLE.N) shares fell during their debut. [ID:nN2357714]

"High-profile names don't always make for good IPOs," Sweet said.

The coming week marks the seventh consecutive week of companies listing new shares on U.S. exchanges, the longest string for IPO activity this year. U.S. IPO activity totals $11.6 billion in 2009, a 56 percent drop from 2008, according to the Thomson Reuters Investment Banking Scorecard. (Reporting by Deepa Seetharaman; editing by John Wallace and Maureen Bavdek)