Golden Nugget Bids for 27% of Hilton Hotels; May Attempt Takeover
Golden Nugget Inc., which operates hotels and casinos in Las Vegas and Atlantic City, N.J., made a bid Wednesday to buy about one-fourth of Hilton Hotels Corp. and said it may try to take over the Beverly Hills-based company in a transaction that could be worth as much as $1.8 billion.
In a letter to James E. Bates, executor of the estate of Hilton Hotels founder Conrad N. Hilton, Golden Nugget offered to buy up to 6.78 million shares, or 27.4%, of Hilton stock for $72 per share, or a total of $488.3 million.
Golden Nugget, in a statement, added that the company “would consider providing similar values in a negotiated transaction to all of the shareholders of Hilton.”
If Golden Nugget were to pay $72 per share for all of Hilton’s 24.7 million shares, the deal would be worth about $1.78 billion.
The offer, which is scheduled to expire April 12, is not subject to any financing or other conditions, Las Vegas-based Golden Nugget said.
Price Called ‘Inadequate’
Barron Hilton, chairman of Hilton Hotels and son of Conrad Hilton, responded in a three-paragraph statement that the $72-per-share offer is “inadequate.”
Hilton Executive Vice President John Giovenco said that Bates has sent a letter to Stephen A. Wynn, chairman and chief executive of Golden Nugget, saying that Bates also considers the price “inadequate.”
According to Giovenco, Bates’ letter also says that there is a substantial question about whether Bates could sell the stock because of a probate dispute and that Bates wouldn’t attempt to sell the stock without the approval of the probate court.
Bates, a Los Angeles lawyer, was out of his office and unavailable for comment Wednesday.
“We’ve made what we consider to be a fair and reasonable offer,” said Bruce A. Levin, vice president and general counsel of Golden Nugget.
Golden Nugget “stopped short of saying that we’re planning a takeover (because) that’s the reality,” Levin said.
Golden Nugget currently considers Hilton a “good investment” but is leaving open the option to make a future bid for other shares, he said.
The block of 6.78 million shares has been tied up in probate court since shortly after Conrad Hilton died in 1979 at the age of 91.
According to Hilton’s will, the stock was left to the Conrad N. Hilton Foundation, a Los Angeles-based philanthropic foundation, up to the limit that tax laws permit. Barron Hilton was granted an option to buy any shares beyond that legal limit.
IRS Asked to Rule
However, a complex dispute over ownership of the shares arose because tax laws were unclear about how much of the stock the foundation could accept, spokesmen for Hilton and Golden Nugget said.
Barron Hilton maintains that the entire gift is invalid and that he should be allowed to exercise his option to buy the shares at $24.20 per share, the value of the stock when Hilton died.
The Internal Revenue Service has been asked to rule on the matter.
Analysts speculated that Wynn, the flamboyant chief executive who appears in commercials for Golden Nugget, is probably more interested in buying a large stake in Hilton to trade for one or more of Hilton’s casinos, or in triggering a bidding war for Hilton, than he is in actually taking over the much-larger company.
Hilton reported profits of $114 million on revenue of $686.6 million in the year ended Dec. 31, 1984, while Golden Nugget had profits of $5.3 million on revenue of $384 million.
On the New York Stock Exchange, Hilton was the 10th most active issue Wednesday, closing up $8.50 at $72.25 as 815,000 shares changed hands. Golden Nugget close up 37.5 cents at $12 on a volume of 440,300 shares.
“I think it’s a serious offer,” said John J. Rohs, an analyst with Wertheim & Co. in New York, “but I think what (Wynn) really might have in mind is to see if (Hilton) might be willing to swap an ownership position in the company for Atlantic City (casino) or one or two of the Las Vegas properties.”
In his letter, Wynn noted that “acquisition of a significant interest in Hilton would be beneficial to Hilton and its stockholders, particularly in light of the recent developments in New Jersey.”
New Jersey gambling regulators in February found Hilton unfit to hold a casino license for its $308-million, 610-room hotel-casino in Atlantic City but subsequently agreed to give Hilton a rehearing on the case.
‘Already Licensed’
Hilton and its shareholders would benefit if Golden Nugget became a major shareholder, Levin said. “Because we’re already licensed and qualified, it might affect the (licensing) process in New Jersey,” he said.
“I think it would be mainly beneficial to (Wynn),” Giovenco responded.
Golden Nugget recently took a $15-million write-off by abandoning a second hotel-casino project that it had been planning to build next to Hilton’s complex in Atlantic City.
Lee Isgur, an analyst with Paine Webber, Mitchell Hutchins in New York, said Wynn “doesn’t bluff.”
“It’s not that he wants to take (Hilton) over--(but) he would be willing to “ Isgur said. “He would not be averse to taking over Hilton’s property in Atlantic City.”
Isgur said both Hilton Hotels and Golden Nugget are “extremely well-run companies” that are both dominated by dynamic leaders.
Hilton Hotels owns, leases or manages 53 hotels in the United States and has franchised another 205 hotels.
Outside the United States, Hilton hotels are owned or franchised by Hilton International, a subsidiary of Transworld Corp.
