Hiton-Itt War
Essay by kazimberk • May 22, 2015 • Case Study • 534 Words (3 Pages) • 1,586 Views
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The Hilton-ITT Wars
Suggested Study Questions
- Why might Bollenbach have opened his bidding for ITT at USD 55 per share? What was his likely strategy?
On January 27, 1997, Hilton offered to $55 per a share in cash for 50.1 percent of ITT shares and S55 a share in stock for the rest. The acquisition would be accounted for as a purchase transaction. If successful, this transaction would he the biggest takeover ever in the lodging and gaming industry.
Wall Street was very excited about this tender offer: Hilton's shares increased 10 percent following the announcement, an unusual move for the stock of an acquiring company. Turner observed, "it's an indication of the market's enthusiasm for the proposal and the value Hilton could bring."
Both ITT Corporation and Hilton Corporation were in a race to dominate the lodging and gaining industry. They competed for the same customers, more or less, in their main business segments, lodging and gaming. Both were acquiring hotel properties in the luxury and midscale markets.
In addition, ITT had approached Hilton to acquire its hotel business in 1960 and its hotel and gaining business in 1994. On both occasions. ITT's offer was rebuffed.
- Why did Bollenbach not raise the bid between January and July?
Late January is an ideal time to make this tender otter to ITT shareholders because:
1. ITT shares are expected to remain undervalued.
2. ITT's entire board of directors is up for reelection. This is a golden opportunity to oust all of the ITT directors at the next annual meeting.
3. A merger between FIT and Hilton may result in the cancellation of ITT's Tampa Hotel Project, The ambiguity around the merger will have a negative impact on ITT's projected earnifigs and ITT's share price.
There were a number of issues to address after Hilton's February 12th offer was rejected. Bollenbach knew that the next steps would be critical or the deal to go through. As such it was necessary to first research the investors and arbiters to have better negotiation tactics when the time comes.
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