* Shares open at $16.75, below IPO price of $17
* Blackstone-backed company valued at about $2 bln
* IPO raises $650 mln
(Adds details on the IPO market)
By Neha Dimri and Anil D'Silva
April 9 Shares of Blackstone-backed hotel chain
La Quinta Holdings Inc made a subdued market debut as
investors took the view that the stock was fully priced in a
crowded IPO market.
La Quinta's shares, which priced below the expected range at
$17, fell as much as 4 percent in early trading before
recovering their losses to trade up more than 2 percent.
At $17, the company is valued at just over $2 billion.
More than a dozen companies, including auto lender Ally
Financial Inc, are expected to price share offerings
this week, making it the busiest week for IPOs since 2006.
"(La Quinta's) offer price is reflecting a very high
price-earnings ratio for a company in a very competitive
industry," said Jay Ritter, an IPO expert at the University of
Based on the offer price, the company has a trailing
price-to-earnings (P/E) ratio of more than 46, almost double the
industry average of 24 percent.
Analysts also said La Quinta's offering comes at a time when
investors, with so much to choose from, are becoming more
Offerings from small biotechnology companies and cloud-based
technology firms have fared better than most large IPOs in the
last few months.
Larger offerings are also more difficult to price, analysts
La Quinta - which operates or franchises more than 830
hotels in 46 U.S. states, Canada and Mexico - was bought by
Blackstone Group LP in 2006 for $2.3 billion plus debt.
The hotel chain had about $2.10 billion in debt on a pro-
forma basis as of Dec. 31.
Blackstone, which did not sell any shares in the offering,
will hold a stake of about 64 percent in La Quinta after the IPO
if the underwriters fully exercise their option to buy
JPMorgan and Morgan Stanley were lead underwriters for the
THIRD HOTEL IPO
The IPO marks the third hotel chain offering in the past six
months by the private equity firm, which is the biggest owner of
hotels in the United States.
Blackstone took Hilton Worldwide Holdings Inc public
in December in the biggest-ever hotel IPO that raised $2.34
billion. In November, the IPO of Extended Stay America Inc
raised $566 million.
Shares of both Hilton and Extended Stay, which is co-owned
with Centerbridge Partners LP and Paulson & Co, have risen since
La Quinta, which owns and operates hotels under the La
Quinta Inn & Suites and La Quinta Inns brands, raised $650
million from the offering of 38.25 million
The company's revenue rose 11 percent to $909 million on a
pro-forma basis in 2013. Net income was $44.9 million, compared
with a loss of $35.8 million a year earlier.
La Quinta, founded in 1968 by real estate entrepreneur Sam
Barshop and his brother Phil, has more than doubled the number
of its hotels since Blackstone took the company private.
U.S. business travel grew more than expected in 2013 and
spending will likely rise by almost 7 percent to about $290
billion in 2014, according to the Global Business Travel
Association, a trade group for business travel managers. (r.reuters.com/rem86v)
IPO activity during the first quarter totaled $47.2 billion,
an increase of 98 percent from last year at this time and the
strongest annual start for global IPOs since 2010.
About 75 percent of U.S. IPOs in the first quarter were from
companies backed by private equity firms, according to a report
by auditing firm PricewaterhouseCoopers.
(Editing by Saumyadeb Chakrabarty)