Originally created 01/29/97

Hilton hostile bid will bring little local impact



Hilton Hotels wants to buy the owner of the New York Knicks and Rangers, but not because it's enamored with sports.

Hilton, the well-known hotelier and casino owner, is looking to gobble up ITT Corp. for its Sheraton hotels and varied betting parlors. On Monday, it launched a $6.5 billion hostile bid for ITT and some are giving odds that the hunted will put up a fight.

A merger of the two hospitality giants should have little impact on the Sheraton Augusta Hotel, according to local observers who spoke Tuesday. The 179-room hotel is owned and operated by IMIC Hotels of Columbia, which holds a franchise from Sheraton for two other hotels besides the one in Augusta.

"I don't think it will have any negative effect on us at all locally," said Barry White, executive director of the Augusta Metropolitan Convention and Visitors Bureau.

"People change names all the time," said David Jones, general manager of the Augusta Hilton. He said consumers have equal respect for both companies, meaning customers would see little change if the deal goes through.

For its part, Hilton doesn't seem to be expecting much cooperation.

"We tried to approach them last fall through an intermediary and they said they didn't want to talk," Hilton chief executive Stephen F. Bollenbach said in an interview.

ITT confirmed Monday that it had received the "unsolicited" bid from Hilton but said nothing to tip its hand, explaining that it would consider the offer and respond within 10 business days.

Hilton said it intends to take its offer, a cash and stock bid, directly to ITT shareholders.

Prudential Securities Corp. is recommending investors buy Hilton stock, according to Jon Simowitz, vice president and Augusta branch manager. During a conference call Tuesday with brokers nationwide, Prudential's hospitality analyst reported that New York banks are already offering to finance the deal without lowering Hilton's credit rating, Mr. Simowitz said.

"No white knight is going to ride in to protect ITT. This is probably about the best deal they'll get," Mr. Simowitz said.

The development represents an ironic turn for ITT, which had once been a voracious acquirer of companies and typified the idea of a conglomerate. Little more than a year ago, it pared back to focus on leisure and entertainment businesses like casinos, hotels and sports franchises.

Now it finds its casinos and hotels a target.

In December 1995, ITT completed a three-way split, spinning off its insurance and industrial businesses to become more focused. Bollenbach suggested still more could be done.

Citing Madison Square Garden, the Knicks and the Rangers, as well as ITT's just-launched joint-venture TV station with Dow Jones & Co. called WBIS+, Bollenbach said ITT's entertainment businesses would be "carefully reviewed as to their long-term strategic fit."

ITT's phone directory and technical schools businesses would also come up for review. Bollenbach said that by selling assets that don't mesh with ITT's main business, Hilton could increase the value of the company.

Cost savings from a merger could come to more than $100 million a year, Hilton projects.

Harold Vogel, an entertainment and gaming analyst at the brokerage firm Cowen & Co., sees ITT putting up a fight. "The price is too low, and I think they want to remain independent if they can."

ITT spokesman Jim Gallagher put it this way Monday evening: "Our management and board of directors will consider the offer and within not more than 10 business days will make our recommendations to our shareholders. In the meantime, we ask our shareholders not to take any action until they have been advised of ITT's position."

Hilton, which operates casinos including the Flamingo Hilton in Las Vegas, plans to assume about $4 billion in debt as part of the deal, bringing its total value to $10.5 billion.

Bollenbach said Hilton wants to "be a leader in the consolidation of the gaming business." He noted the two companies' hotel operations also make a nice fit and said a combination would bring benefits to shareholders, workers and other constituencies of Hilton and ITT.

A merger would create the world's largest owner of big hotels and casinos. "There's no one that comes close," Vogel said.

Hilton said it intends to take its offer, a cash and stock bid, directly to ITT shareholders. The hotel and gaming company is offering $55 a share in a two-part transaction, the first a cash bid for half of ITT's shares. Then, Hilton will offer its own shares worth the same $55 amount.

ITT shares shot up $14.75 Monday to close above that level. Although it gave up a little of the gains this morning, it remained above the Hilton bid today, perhaps because Hilton said it could wind up offering more for ITT once it gets a chance to review confidential details of the company's financial books.

"I hope that we can immediately engage with the management of ITT to see how we can do this," Bollenbach said.

Hilton's chief executive officer is no rookie at buying and selling companies. Before joining Hilton last year, he served as chief financial officer at Walt Disney Co. and was credited with pushing forward the purchase of ABC. Before that he was CEO of Host Marriott Corp., which he helped create in 1993 by splitting Marriott Corp. in two. He has also worked for the Trump Organization.

Already, Bollenbach has shown his acquisitive instincts at Hilton Hotels Corp. In December, it completed a $3 billion purchase of Bally Entertainment Corp., which included $1 billion in debt. ITT had been a suitor for Bally but those talks fell apart.

"They want to establish dominance in the gaming and lodging businesses on a global basis and this is the only way they can do this easily," Vogel said. He added that the international strength of Sheraton hotels would be an important asset for Hilton, which is not as strong overseas.

Hilton said ITT offers 415 hotels with more than 130,000 rooms and 14 casinos with more than 320,000 square feet of gaming space in Las Vegas and Atlantic City, N.J.

Hilton's hotel business has 240 properties with nearly 100,000 rooms and 16 casinos with more than 900,000 square feet of space. Hilton is based in Beverly Hills, Calif., and its premier properties include the Waldorf-Astoria in New York, where ITT is based.

Staff Writer Walter C. Jones contributed to this article.