Barron Hilton Weathers Casino, Takeover Battles : Hilton Chairman Can Smile Again
Barron Hilton, son of hotel empire founder Conrad N. Hilton, spent much of his 57 years in a protective aura of wealth and success. But events of the last couple of months left him feeling like a mugging victim.
However, all that has changed in the last week for the Hilton Hotels chairman and chief executive. On the eve of the company’s annual meeting Monday, he was talking like a happy, relaxed man.
Hilton said in a pre-meeting interview that he was feeling that way for two reasons: one, apparent victory over what he calls “unfriendly overtures” about an acquisition from another gambling casino owner, Las Vegas-based Golden Nugget; and two, what he sees as the company’s satisfactory strategic withdrawal--more or less unscathed--from the its traumatic foray into the gambling regulatory process in New Jersey.
“Now,” Hilton said, “I can go back to work and run a hotel company.”
Preparing for the annual meeting in his Beverly Hills office, Hilton was assured by his legal and financial strategists that management, aided by two key court victories last week, was sure to win ratification of several anti-takeover proposals on Monday’s ballot.
Golden Nugget’s last-ditch proxy fight against the proposals would not change the majority of proxies cast for management, they told him.
Hilton is a courtly and mild-spoken man, but his somewhat cherubic expression clouded over when he spoke of the unexpected decision Feb. 28 by state gaming control regulators that denied his company a New Jersey casino license and of Golden Nugget using the occasion to seek a controlling share of Hilton Hotels.
He claimed that “a lot of the financial information” was provided to Golden Nugget by its investment bankers, Drexel Burnham Lambert, which had done extensive research on Hilton the year before.
Hilton Vice President John Giovenco said that Drexel Burnham’s research department had approached Hilton Hotels last year with the idea that the company would be a good candidate for a leveraged buy-out by management. He said that Barron Hilton told Drexel Burnham’s research people that the proposal would not be in the best interests of the stockholders and that he didn’t plan to go ahead with such a move.
According to Barron Hilton, the proposed leveraged buy-out price was precisely the $72-per-share figure that Golden Nugget recently offered for a 27.4% block owned by the Conrad N. Hilton Foundation.
In response to a question, Hilton said he knew of no similar instance of an unfriendly overture by one publicly traded company for another in the casino industry. Although he has been restrained from commenting on the moves, his associates and lawyers have spoken critically of “personal” remarks and “reckless gutter attacks” on the company and its executives by Golden Nugget leaders and in that company’s court and proxy statements.
The train of events began, Hilton noted, when he took his company into New Jersey after successive invitations from two governors of that state.
Without waiting to go through the licensing procedures, Hilton Hotels launched construction of what its chief executive described, in a message dated last Jan. 31 in its 1984 annual report to shareholders, as “the largest single project ever undertaken by Hilton, and the most promising.”
$50,000-a-Year Retainer
That rosy view came despite the fact that the New Jersey Casino Control Commission had interrogated Hilton at great length in two separate sets of hearings in the last half of 1984 on how his company came to hire controversial labor lawyer Sidney Korshak and keep him on a $50,000-a-year retainer for 13 years despite national publicity about his reputation among law enforcement agencies as an organized crime adviser.
On Feb. 28, despite an unconditional recommendation by the New Jersey attorney general’s division of gaming enforcement, two of the four casino control commissioners voted against Hilton and thus kept it from a required majority for licensing.
And even the two who voted for Hilton voiced misgivings about Korshak as well as other matters involving Hilton management.
Hilton says he was “obviously shocked and stunned” by the rejection.
He told stockholders Monday that “virtually all the work” in labor matters was done by two members of Korshak’s firm, “both well-regarded . . . members of the Illinois bar.” He also said that many hotels and hotel associations have used the same firm “because of their expertise in our industry.”
Although Hilton Hotels sought and was granted a New Jersey rehearing, the situation was quickly complicated by Golden Nugget’s $488-million offer April 3 to buy the 27.4% stake in Hilton held by Conrad Hilton’s estate. That block is tied up in probate court pending resolution of various disputes--including whether the Conrad N. Hilton Foundation or Barron Hilton is entitled to the shares.
James Bates, the estate’s executor, rejected Golden Nugget’s offer of $72 a share as insufficient. Last week a probate judge refused a request by the California attorney general’s charitable trust division to bar Bates from voting the 27.4% holding for Hilton’s anti-takeover measures.
Sold Casino to Trump
That key victory was followed by a second one in federal court, where a judge refused Golden Nugget a preliminary injunction to postpone the balloting on the anti-takeover proposals.
Meanwhile, Hilton Hotels wrapped up a contract April 27 selling its New Jersey hotel-gambling complex to New York developer Donald Trump. Barron Hilton says that the price was $320 million cash and that Trump was told at the outset that the company was interested only in discussing an “unconditional” deal.
Hilton’s license rehearing, which was to open last Monday, was postponed, at least until July and perhaps permanently.
Meanwhile, Hilton’s chief executive says he’s wrapped up in the company’s casino now under construction in Australia--its first international casino venture--and in a new plan to enlarge the Flamingo Hilton in Las Vegas.
