Bates Asks to Move Shares to Hilton Charity

Seeking to defeat Hilton Hotels Chairman Barron Hilton’s claim to buy a controlling block of the hotel chain’s stock, the executor of Conrad N. Hilton’s estate asked for court permission Thursday to turn over more than half of its 27.4% holding to a charitable trust.

The petition by James E. Bates was the first major move in his avowed intent to see that voting control of the big hotel chain goes to the Conrad N. Hilton Foundation in trust for charities, as Conrad Hilton’s will provided. The company founder died at 91 in 1979.

Los Angeles County Superior Court Judge Robert I. Weil did not rule immediately on the request, pending further proceedings.

Attorneys for Barron Hilton assured Weil in a conference in his chambers Thursday that they will fight Bates’ proposed “interim” distribution of 3.6 million of the estate’s 6.8 million Hilton Hotels shares to the foundation.

Option to Buy Shares

Their client has an option under his father’s will to buy any hotel company shares that cannot go to the foundation if they are in excess of a 20% limit on business holdings by a private foundation under a 1969 tax law.

However, under a complex legal theory, Barron Hilton has asked the IRS to rule that all 6.8 million shares would constitute an excess holding by the foundation.

Hilton has claimed in court a right to buy them under his option at the 1979 market price of $24 each, which is one-third of the $72 bid for them recently by Las Vegas-based Golden Nugget, a casino operator.

Both Bates and Barron Hilton had termed the $72 offer “insufficient.” The difference between the $24 and $72 prices for the entire block amounts to $325.5 million.

Although Barron Hilton recently said he had received a favorable but tentative IRS ruling on the excess-holding issue, Judge Weil indicated Thursday that he is disposed to move ahead on individual issues that Bates and the foundation say could affect the course of IRS rulings on two issues before it.

They said a “self-dealing” ruling under consideration by the IRS might require Barron Hilton, who is a director of the foundation, to pay full market value for any stock that he buys from the estate.

Myron Harpole, Bates’ attorney, said he did not think “anyone here would disagree” that the probate dispute would disappear if Barron Hilton “had to pay the full market price.”

Weil asked if anyone disputed that statement.

Ron Gother, one of Barron Hilton’s lawyers, responded: “I would have to ask my client.”

His co-counsel, Wayne W. Smith, argued that a “piecemeal” approach to issues in state court could cause the dispute to “drag on” for years, with each side appealing all decisions.

Smith said the question of control of Hilton Hotels “is every bit as important as the money.” He added that doubt among financial institutions as to the ultimate control of Hilton Hotels could have an unsettling effect, and the problem of stability was of concern to Barron Hilton.

Noting that the company does not have standing in the Hilton estate case, Judge Weil added that, if Barron Hilton “is really concerned” about stability, “maybe he ought to drop his option.”

According to Bates’ court filing, the foundation presently owns 1.31% of Hilton stock and Barron Hilton holds 3.58%. If permitted by the court, the distribution of 3.6 million more shares to the foundation would increase its holding to about 16%, which then would be the largest single holding of Hilton’s stock.

Meanwhile, Hilton Hotels said Thursday that official tallies show its anti-takeover proposals passed with majorities ranging from 63% on one to 74% on another at last Monday’s annual stockholders meeting.

Also, Golden Nugget dropped its lawsuit alleging that Hilton had violated securities laws in its proxy material for the annual meeting. A federal judge here had refused a temporary order that would have delayed the vote on the proposals.