NEW YORK— The hotel industry can expect the pace of initial public offerings (IPOs), public equity raised, and mergers & acquisitions (M&As) to increase significantly in 2004, according to PricewaterhouseCoopers (PWC). The company released a statement today that said “in 2004 the U.S. lodging industry IPO activity will be the highest since 1996, when there were 12 public offerings, which raised $1.06 billion.” PWC estimates that there will be four to seven IPOs, including several REITs, this year. In addition, the company said that “in 2004 total public equity raised will be the greatest since 1997, when there were 29 offerings that raised $3.7 billion.” PWC estimates that there will be as many as 10 or more secondary offerings with the total raised likely to exceed $3.0 billion. As for mergers and acquisitions, PWC noted that “in 2004 M&A activity will be the highest since 1999, when there were 11 major transactions.” PricewaterhouseCoopers estimates there will be five to 10 major transactions this year. The peak was in 1998 when there were 25 transactions. All of the named activity is being supported by industry conditions that are favorable for such transactions, said PWC. This includes: — EBITDA multiples of individual lodging companies ranging between 10 and 15, favorable multiples for companies to raise public equity; — a trend of and forecast for increasing profits in 2004, 2005 and beyond; — an appreciation the lodging sector is less risky than it was in the past (low delinquency rates and continued profitability – unlike prior recessions); — a perception that there is potential upside. “Companies have been deferring transactions awaiting more receptive equity markets, and the equity markets and institutional investors have been awaiting signs of accelerating industry performance,” said Bjorn Hanson, Ph.D., global leader of PricewaterhouseCoopers Hospitality & Leisure Practice. “All of the requirements for IPOs, secondary offerings and M&A activity are emerging.”
