Acquisition News Propels Hilton Hotels To Top Of Rosenberg Center Franchise 50
By Lori Wright, Media Relations
November 21, 2007
Hilton Hotels took the top spot in the Rosenberg Center Franchise 50 Index
as its stock price skyrocketed on acquisition news while the bad news continued
for Krispy Kreme, the index’s worst performer for the quarter.
The Rosenberg Center Franchise 50 Index was developed by the William Rosenberg
Center of International Franchising at WSBE. It tracks the market performance
of a portfolio of 50 U.S. public franchise companies that are representative
of the U.S. business format franchising sector.
Overall, the Rosenberg Center Franchise 50 Index ended 1.1 percent higher
in a third quarter 2007 marked by high volatility in the financial markets
and an uncertain economic environment. During this quarter, the S&P 500
Index reached a multi-year record close of 1,555 in July and then dropped almost
10 percent in August, giving back all the gains it made in 2007. By the end
of September, the S&P 500 had recovered most of its losses and closed 1.6
percent up for the quarter after the Federal Reserve Bank lowered its interest
rate target by an unexpectedly high 50 basis points to 4.75 percent.
“The volatility in financial markets was driven by a number of economic
events, including a deteriorating housing market, a credit crunch, a weakening
job market, record high oil prices, record low dollar exchange rates, and sinking
consumer confidence. Thirty-six of the 50 components of the RCF 50 Index lost
market value this quarter,” Hachemi Aliouche, senior research fellow,
The Rosenberg Center Franchise 50 Index is up 92 percent since January 2000,
while the S&P 500 is up 9.5 percent over the same period. The index tracks
the market performance of the top 50 U.S. public franchisors.
Leader Hilton Hotels Corp. (HLT) was acquired by Blackstone Group LLC for
$47.50 a share, which drove Hilton’s stock price up sharply. Hilton gained
39 percent in market value by the end of the quarter and its acquisition will
make Blackstone the largest hotel operator in the world.
Doughnut maker Krispy Kreme (KKD) reported worse-than-expected financial results
in early September, and its stock price plunged 38 percent in one day. Declining
sales and high impairment charges and lease termination costs led to a net
loss of $27 million, a much higher loss than the $4.6 million loss the previous
year. It finished the quarter with a 57 percent loss of market value, making
it the worst performer of the index.
This quarter saw a number of sales of franchise companies, including two components
of the Rosenberg Franchise 50 Index. ServiceMaster International was acquired
in July by an investment group led by private equity firm Clayton, Dubilier & Rice
Inc. for $15.625 per share in cash in a transaction valued at $5.5 billion.
Option Care Inc. was bought in early September by Walgreen Co., the largest
drugstore chain in the United States, for $19.50 a share for a transaction
value of $850 million.
“These come on the heels of the acquisitions during the second quarter
2007 of RCF 50 Index components Realogy Inc., Outback Steakhouse Inc., and
Bandag Inc. by private equity firms Apollo Management, Bain Capital, and Bridgestone
Americas, respectively. RCF 50 Index components Hilton Hotels Corp, Wendy’s
International and Applebee’s International are currently in the process
of being sold,” Aliouche said.
For more information on The William Rosenberg International Center of Franchising
or the Index, please visit the center’s Web site at http://franchising.unh.edu.