Hilton May Have to Sweeten Its Bid for ITT

If Hilton Hotels Corp. wants to move quickly to satisfy its corporate appetite for the large casino and hotel operations of rival ITT Corp., it will probably have to sweeten its $10.5-billion takeover bid, industry analysts said Tuesday.

ITT, which owns the Sheraton hotel chain and Caesars Palace in Las Vegas, is worth more than the $55 per share in cash and stock that Hilton has offered, said industry analyst Harold Vogel, echoing the comments of other observers. ITT, which would boost the size of Hilton’s gaming business and expand its network of international hotels, is worth at least $60 a share, he estimated.

“I don’t think [Hilton] is going to get away with this kind of price,” Vogel said.

Hilton might consider adjusting its price after reviewing ITT’s books, said Hilton President and Chief Executive Stephen F. Bollenbach during a teleconference call with reporters Tuesday morning. For now, though, the offer stands.

“It’s a strong offer,” he said.

On Monday, Hilton offered $6.5 billion in cash and stock for ITT. In addition, the company would assume $4 billion in ITT debt.

While Hilton was under pressure to raise its bid, New York-based ITT came under legal pressure to accept the offer. In suits filed Tuesday by three ITT shareholders in New York, the company and its board of directors were alleged to have “violated their fiduciary duties” by rejecting previous Hilton efforts to negotiate a merger, according to Bloomberg News.

ITT spokesman Jim Gallagher said the company has not reviewed the lawsuits, but he said the company’s board has already begun to review Hilton’s offer.

On Wall Street on Tuesday, shares of gaming stocks rose as investors bet on the industry’s continued rapid consolidation. On the New York Stock Exchange, Mirage Resorts rose $1.375 to $24.75, Showboat ended the day up $1.50 at $22 and Primadonna was up $1 at $20.

Hilton shares jumped $2.625 to $27.875 on the New York Stock Exchange after trading as high as $30. ITT, which jumped more than $14 in after-hours trading on Monday, fell $1.625 to $56.875.

ITT holds tremendous attraction for Hilton, which has pursued an aggressive-growth strategy in both the hotel and casino-gambling businesses. It would take Hilton several years of shopping for individual properties to buy as many hotels and casinos as it would collect in one swoop with the takeover of ITT, industry analysts said.

The merger would expand Hilton’s already sizable presence in the nation’s two largest gambling markets, Las Vegas and Atlantic City.

In addition, ITT’s large and well-known Sheraton hotel chain would complement Hilton’s efforts to bulk up to better compete in a highly fragmented industry. Players in Los Angeles alone range from Hong Kong-based Regal Hotels International, which owns the Biltmore Hotel, to the Mondrian Hotel in West Hollywood, owned by New York hotelier Ian Schrager, to the Beverly Hilton, which is owned by entertainer Merv Griffin, in Beverly Hills. Hilton also stands to expand its international exposure through Sheraton, which owns, manages and franchises about 200 foreign properties, according to industry analysts.