ITT to fight Hilton bid

Gary Thompson

Wednesday, Feb. 12, 1997 | 11:59 a.m.

ITT Corp. said today it will fight Hilton Hotels Corp.'s hostile takeover attempt in federal court in Nevada.

ITT said it will file a lawsuit alleging Hilton misused confidential information it obtained during its takeover of Bally Entertainment Corp., which had previously discussed a potential merger with ITT. Hilton's acquisition of Bally closed in December.

ITT also said Hilton's $10.5 billion bid, which includes the assumption of $4 billion in debt, is too low. That prompted securities analysts to speculate Hilton would have to raise its offer. Hilton has said it may do so if it's allowed to review ITT financial data.

Furthermore, ITT said Hilton's attempt to forge the world's largest gaming and lodging company would exacerbate existing rivalries between the Sheraton and Hilton hotel chains and could create "illegal" hotel monopolies in some cities.

If successful, the takeover would merge ITT's 415 hotels and 14 casinos with Hilton's 240 hotels and 16 casinos.

Hilton, meanwhile, said it remains determined to acquire ITT, but warned it may cut its $55-a-share offering price for ITT stock if the target company's defensive actions result in dilution of assets.

"Nothing in this response changes our plans or intention to make this merger happen," said Marc Grossman, Hilton senior vice president.

Hilton also nominated 25 people, including three Nevadans, for election as ITT directors in a bid to ensure its hostile takeover attempt succeeds.

ITT stock rose $1.625 to $57.625 in mid-morning trading today on speculation that Hilton ultimately would offer more for ITT, while Hilton's fell 25 cents to $27.875.

ITT's announcement came just one day before the Thursday deadline for an official response to the Hilton offer disclosed Jan. 29. While ITT had been mum until now, company executives had privately indicated it would fight the Hilton offer.

As late as Tuesday night, ITT executive Jim Gallagher said the company hadn't formulated its response.

"A lot of people in ITT management are working hard and deliberately to help our board analyze the Hilton offer," Gallagher said. "Meanwhile, we're running our businesses as effectively as we've always run them."

Today, ITT Chairman Rand Araskog said the company may sell nongaming assets such as its 50 percent stake in Madison Square Garden, the New York Knicks and New York Rangers, and the New York business and sports television station it owns in a joint venture with Dow Jones & Co.

The sale of such assets was among the moves proposed by Hilton President Steve Bollenbach when he urged Araskog to accept the Hilton offer.

ITT's plan to fight the takeover attempt in Nevada may generate behind-the-scenes support from some competing gaming operators concerned about the prospect of one company controlling about a third of the state's major hotel-casinos.

Yet ITT's stance could backfire if it pursues another strategy to enhance shareholder values and curry support from big institutional investors. Speculation over ITT's possible defenses have focused on it launching its own takeover attempt of other gaming or lodging companies.

The latest speculation centers on ITT targeting MGM Grand Inc. or Primadonna Resorts Inc., joint venture owners of the hottest new resort in Las Vegas, New York-New York, or offering its centerpiece gaming property, Caesars Palace, to Mirage Resorts Inc. to raise money for the Planet Hollywood projects opposed by Hilton.

Noting the swirling rumors, Hilton's Bollenbach warned ITT any moves that result in dilution of its value would have consequences. In a letter sent Tuesday to ITT's Araskog, Bollenbach wrote:

"I am sure that you have read, as we have, the various press reports speculating on defensive mechanisms you might employ to keep our offer from your shareholders.

"Of course, we have no knowledge of the accuracy of these reports, and we assume that you will not take actions to frustrate the wishes of your shareholders or to diminish the value of their equity.

"Let me reiterate, however, our commitments to making this combination a reality. We do not intend to be deterred from pursuing our offer by any actions that you may choose to take," Bollenbach said.

"But to the extent your actions reduce the value of the combination to us, we would of course be required to review the per-share price that we would be able to pay and, if necessary, adjust the terms of our offer."