ITT Rejects Sweetened Hilton Offer

ITT Corp. on Thursday rejected Hilton Hotels Corp.’s sweetened $11.5-billion offer, leaving Hilton to concentrate on its legal options in the nearly 8-month-old takeover saga.

New York-based ITT, which owns the Sheraton hotel chain and Caesars Palace in Las Vegas, said its board voted unanimously to recommend that shareholders reject Hilton’s bid, which ITT described as inadequate.

Last week, Beverly Hills-based Hilton boosted its offer for ITT to $70 a share from $55, thus increasing its $10-billion offer by about $1.5 billion. In addition, the company, which owns Hilton hotels in the U.S. and Bally’s casinos, said it would assume ITT’s debt.

ITT said its shareholders would be better served under a management plan to split up the once-huge conglomerate into three smaller firms, including one focused on the hotel and casino gambling business. In addition, the company said it will buy back about 25% of its common stock at $70 a share.

ITT said it expects the plan to be completed in the next few months.

“The three independent companies that will emerge from ITT’s comprehensive plan will all be strong, focused companies with powerful market positions and excellent management,” ITT Chairman Rand Araskog said.

Hilton executives said they are not surprised by ITT’s decision, which was widely expected. Since the hostile takeover offer was launched in January, ITT has refused to meet with Hilton executives and postponed its shareholders meeting, thwarting Hilton’s attempt to launch a proxy fight for control of the firm.

“They have no interest in letting their shareholders decide this,” Hilton spokesman Marc Grossman said.

ITT has said that its bylaws allow it to carry out the spinoff without shareholder approval. But Grossman said Hilton will continue its legal effort to try to block the plan and force the firm to a shareholder vote.

“We are pursuing this in court, and that’s ultimately where this is going to be decided,” he said.

Hilton shares rose 6 cents to close at $30.19 on the New York Stock Exchange; ITT eased 19 cents to close at $63.75, also on the NYSE.