Hilton Boosts Bid for Defiant ITT by 27%--to $8.3 Billion

Hilton Hotels Corp. raised its bid Wednesday for ITT Corp. by 27% to $8.3 billion, putting ITT on the defensive again after it announced a plan to thwart the hostile bid in July.

“We’re taking our best shot,” Hilton Chief Executive Stephen Bollenbach said. “We wanted to make sure all the cards are on the table, and they are now.”

A combination of Hilton and ITT would create the world’s largest hotel and gambling company with annual sales of more than $10 billion.

ITT, based in New York, owns Sheraton hotels and Caesars casinos. Hilton, based in Beverly Hills, owns Hilton hotels in the United States, and Hilton and Bally’s casinos.

“This is probably a once-in-a-lifetime opportunity. These two boards should recognize the long-term potential and work out their differences,” said Bruce Turner, financial analyst with Salomon Bros.

But in the high-stakes poker game between the companies, ITT management has rejected each Hilton offer and fought bitterly to remain independent. An ITT spokesman said the company’s board would consider the latest proposal, but financial analysts and investors said ITT would probably reject it.

Hilton launched its bid in January at $55 a share in cash and stock in a deal worth $6.5 billion, or about $10 billion, including assumption of debt. The new offer, at $70 a share, is worth $11.5 billion including debt.

ITT rejected the first bid as inadequate and started selling assets, including New York’s Madison Square Garden arena, to build a war chest to thwart Hilton. It also defended itself in federal court where Hilton sought a ruling forcing a shareholder vote on the deal.

Then in July, ITT announced its comprehensive defense against Hilton’s bid, saying it would break itself into three parts--a hotel and casino company, a telephone directory business and an educational services unit. The plan also included an offer for 26% of its stock at $70 a share and restructuring of its debt.

The breakup would give the directors at the new companies terms expiring at different times. The lack of a “staggered board” at ITT is a weakness Hilton sought to exploit by nominating its own slate of directors to be voted on at ITT’s next shareholders’ meeting.

But Hilton’s attempt to win control of the board would be stymied if the breakup were successful, so Hilton boosted its offer.

Bollenbach, who had stuck firm to the original bid, said it was coincidental that Hilton’s $70-a-share bid equals ITT’s tender offer for 26% of its stock.

He defended himself against criticism that he waited too long to raise the bid and said Hilton’s plan all along was to wait until ITT clearly articulated a business strategy.

“We wanted to see what their deal was, and we wanted to make a full, best-bid offer. That’s what we’ve done,” he said.

Hilton said it could save more than $100 million in costs in the merger and that, along with synergies in domestic markets, justified the higher price.

Meanwhile, Hilton urged ITT shareholders to pressure the board to call for a vote on Hilton’s new proposal. Failing that, it will head back to U.S. District Court in Nevada and again ask the court to force a vote.

If those efforts fail and ITT breaks itself into three parts, Hilton said it will walk away.

“If that happens, I think the company is radioactive then,” Bollenbach said.

ITT stock rose $1.81 to close at $64.75, while Hilton fell $1 to close at $31.75, both in consolidated trading on the New York Stock Exchange.