MGM stock jumps amid sale rumor

Gary Thompson

Friday, Oct. 24, 1997 | 11:20 a.m.

MGM Grand Inc.'s stock price jumped more than $5 a share in early trading today on speculation that it may merge with Hilton Hotels Corp.

The price later retreated as skepticism spread about the rumor.

Business Week magazine said in today's edition that Hilton President Steve Bollenbach had contacted Kirk Kerkorian, who owns 62 percent of MGM stock, regarding a possible merger after Hilton's attempt to acquire ITT Corp. foundered this week.

Hilton spokesman Marc Grossman and MGM's Jack Leone said today their companies don't comment on rumors.

Starwood Lodging, a hotel real estate investment trust, announced Monday it would buy ITT for $82 a share, topping Hilton's hostile takeover bid of $70. ITT directors accepted the Starwood offer, which must be approved by shareholders of both companies.

While Hilton said it will keep its $11.5 billion bid open until ITT's annual meeting Nov. 12, many analysts believe ITT shareholders will opt for the $13.3 billion offer by Starwood.

The Starwood offer calls for paying $15 cash and $67 of Starwood stock for each share of ITT common, while Hilton's bid is for $35 cash and $35 in Hilton stock for each ITT share.

Analysts have speculated that Bollenbach, eager to maintain the pace of Hilton's aggressive growth strategy, is lining up other options should the ITT bid fail. Hilton acquired Bally Entertainment Inc. last year in what is, to date, the largest merger in the gaming industry's history.

Business Week said further talks between Kerkorian and Bollenbach are likely. It said an investment banker has predicted Hilton may offer more than $70 a share for MGM, which has about 58 million shares outstanding.

Some analysts are skeptical, though, noting the magazine previously predicted ITT would buy Harrah's Entertainment Corp. and that Hilton would buy Circus Circus Enterprises Inc.

The report also may bolster ITT's defense against Hilton by creating the false impression that Hilton has written off its attempt to acquire ITT. In addition, the story prompted increased selling of Hilton stock, which slipped 62.5 cents to $34 in late trading today.

MGM shares, up more than $5 each at one point, retreated to $45, up $3.50 on volume of about 1.5 million shares. ITT stock climbed 62.5 cents to $74.81, while Starwood Lodging was up $1.625 to $61.1875.