NEW YORK -- The asking price for ITT Corp. has ballooned by more than $3 billion in the last 10 months, yet the hotel and casino giant believes that's still not enough.
ITT said Thursday that neither merger partner Starwood Lodging nor hostile suitor Hilton Hotels Corp. has made its best offer yet. But Hilton broke off talks with ITT, saying they were rigged in Starwood's favor, and left its current $10 billion bid on the table.
A $10.25 billion pact ITT reached last month with Starwood still stands, but ITT said bidding should remain open so it can obtain the best possible price. The remarks came as ITT shareholders are scheduled to vote Wednesday on a new slate of directors proposed by Hilton for ITT's board, who if elected would then accept Hilton's now twice-raised offer.
"What they're saying now is `if you vote for the ITT slate, you aren't necessarily voting for the Starwood deal. ... You're voting for an auction,"' said Arthur Adler, a partner at Coopers & Lybrand's lodging and casino consulting group.
"I would be surprised if there weren't other companies that come forth as well," said Adler, who would not speculate on possible candidates to enter the bidding.
ITT spoke last month to casino mogul Steve Wynn's Mirage Resorts Inc. and buyout firm Kohlberg Kravis Roberts & Co. about a possible merger, but those discussions never reached the serious stage, said a source familiar with the talks who spoke on condition of anonymity.
At Hilton's request, any potential suitors ITT had talked with were freed from confidentiality agreements so they could discuss participating in Hilton's offer, according to ITT.
A Starwood spokeswoman said the company had no comment.
The ITT-Starwood combination would create the world's largest hotelier, with 650 hotels in 70 countries. New York-based ITT owns the Sheraton and Caesars chains. Phoenix-based Starwood, the nation's largest real estate investment trust, is buying the Westin hotel brand.
Hilton, based in Beverly Hills, Calif., owns hotels bearing its name and Bally's casinos.
ITT said when its board met to consider Hilton's latest bid, it voted to hold an annual meeting in March to put the directors up for re-election if Hilton's candidates are rebuffed and if the company has not been sold for the best possible price by then.
"If we haven't done what they want us to do, they can throw us out," spokesman Jim Gallagher said.
If ITT shareholders reject Hilton's nominees, Hilton chief executive Stephen Bollenbach said he will back out of his relentless pursuit.
"That will be their last opportunity to have us be in the auction," Bollenbach said.
But Gallagher said he thinks Bollenbach would raise Hilton's bid for a third time before conceding the takeover battle.
"This man is obsessed with getting ITT. He's not going anywhere but up," Gallagher said.
Hilton first proposed a $6.5 billion takeover in January, which ITT rejected, leading to an $8.3 billion bid in August. After ITT refused that bid and linked up with Starwood last month, Bollenbach said Hilton would not up the ante again. But on Monday, he did.
The higher bid led ITT to engage Hilton in talks for the first time Tuesday, but Hilton walked out, saying ITT gave preferential treatment to Starwood by withholding information.
"We realized we were being tricked and their real purpose was to pretend they were being fair," Bollenbach said.
Hilton says its new $80-a-share bid, while lower overall than Starwood's, is superior because it contains $3.3 billion more cash than the rival offer and would leave ITT shareholders less exposed to stock market gyrations.
Both Hilton's bid and Starwood's $82-a-share offer include combinations of cash and stock.
ITT shares fell 621/2 cents to $79.621/2 to close at $79.621/2 on the New York Stock Exchange, below both suitors' offering price. Hilton shares rose 561/4 cents to $31.621/2, while Starwood shares fell $1.433/4 to $58.811/4, also on the NYSE.