Multiple news outlets are reporting the Blackstone has decided to file an IPO for La Quinta.
La Quinta Holdings Inc. goal is to raise around $100 million from the IPO to repay debt. As of September 30, 2013, the company has $2.8 billion worth of debt.
In 2006, Blackstone acquired "La Quinta for $2.3 billion - not including about $800 million in debt - and has since invested hundred of millions of dollars to upgrade, expand, and promote the chain," according to the
Wall Street Journal.
Over the past year, Blackstone has taken public about 6 different of its portfolio companies including hotel chains Hilton Worldwide and Extended Stay America. The decision to bring La Quinta public has been coming since last summer.
When I read this article, my first though goes to La Quinta's recent promotion Click, Spin, Win, which I wrote about
here, was a ploy for its IPO. By the end of the promotion, 15,000 people were playing the game; most I assume were new members to La Quinta Returns. One could ponder, like me, that this promotion was a ploy by La Quinta to drive up membership prior to the IPO.
We would all be wrong. First, the IPO was filed confidentially in December and the public one in February. It would look bad if the two IPOs differed greatly. Second, according the IPO,
"as of September 30, 2013, we [La Quinta] had nearly nine million members in our La Quinta Returns loyalty program, 2.4 million of which we consider active members (which generally refers to our loyalty program members who earn or redeem La Quinta Return points within the previous 18 months."
Even if all 15,000 players were new members to La Quinta, they would represent .016% increase in membership. Not something that would sway investors to make a bet with them. Therefore, you would have to assume that the promotion was a ploy to increase recognition of La Quinta.
My belief is further support by Hilton's IPO. A few months prior to their IPO, Hilton devalued their Hilton Hhonors program drastically. At the time, the points/miles community though it was just another program devaluation. Months later, we learn the devaluation was apart of their IPO strategy to lower the value of its liability. Since Blackstone owns both Hilton and La Quinta, the assumption is that they would use the same strategy i.e. devaluation. But La Quinta gave players millions of points increasing their liabilities.
The IPO noted that as of December 31, 2012 the total Returns liabilities was $12.1 million.
The only other possibility is the La Quinta's Click Spin, Win was a brand recognition strategy. A plan to get people to think about staying with La Quinta. Will it get more people to stay at La Quinta? I doubt, but only time will tell if the strategy will work.
Maybe I need to stopping thinking that every ploy by a company is evil!
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