Hilton Launches $10.5 Bn Bid For Itt

Hilton Hotels Corp, the largest US hotel and gambling company, offered Monday to acquire rival ITT Corp for $10.5 billion in cash, stock and assumed debt.

In a letter to ITT, Hilton offered to pay $6.5 billion in cash and stock and assume $4 billion in debt, creating the worlds largest lodging and gambling company.

ITT, owner of the Sheraton hotel chain and Caesars World Casinos, said in a brief statement that it had received the offer and would make a recommendation to shareholders within 10 days.

Industry experts said New York-based ITT may hold out for a higher price from Beverly Hills-based Hilton. ITT is a company with a potentially very high value, said Eric Longmire of Wyser-Pratte & Company Inc. Right now, the deck is stacked in favor of the target.

 

Hilton chief executive officer Stephen Bollenbach said Hilton may revise its offer once it has had time to review ITTs books. There might be some upside if we can get toge-ther with ITT management, Bollenbach said. But (the current) price is a real good, strong price. Hilton said the offer represents a 29 per cent premium over ITTs current stock price around $42 a share.

Bollenbach, the architect behind Walt Disney Co.s $19 billion acquisition of Capital Cities/ABC Inc. last year, has had plenty of experience in the deal-making business. Since taking over for Barron Hilton in February 1996, Bollenbach has been trying to turn Hilton into a hotel and gaming powerhouse.

In December, Hilton acquired Bally Entertainment Corp. for $3 billion, snatching the company before ITT could make a play for it. Industry analysts said the proposed deal could be a boon for Hilton.

Its a blockbuster of a deal and would make a tremendously strong lodging and gaming company, said Dennis Forst, financial analyst at Sutro & Co. He said the $55 a share price would be a good buy for Hilton shareholders but ITT shareholders might want more given ITT shares had traded in the mid-60s back in August.

Because of the deals size it might raise eyebrows of state gambling regulators and the Justice Department, Forst added.

Under terms of the ITT proposal, Hilton is offering to buy half of ITTs outstanding shares for $55 a share in cash and the other half for $55 a share in Hilton common stock. The combination of ITT and Hilton would bring together two of the worlds leading lodging companies as well as two premier gaming businesses, Bollenbach said in a statement. Hilton made the offer to ITT management in a phone conversation Monday. In a formal letter delivered later Hilton said it preferred to work with ITT management, but was prepared to try to unseat the ITT board if necessary to complete the deal.

ITTs operations include 415 hotels and 130,000 rooms. Its gambling business operates 14 casinos across the country. Hiltons hotel business includes 240 properties with 100,000 rooms. It also operates 16 casinos.

Hilton said it has entered into a side agreement with HFS Inc., a hotel franchisor and owner of the Avis rental car chain, under which it would license the Sheraton name and management agreements to HFS for HFS to operate.