UAL to Buy Hilton International for $980 Million After KLM Cancels Deal
In a surprise move, Transworld Corp. said Tuesday that it would sell its Hilton International hotel chain for $980 million in cash and securities to UAL Inc., parent company of United Airlines, after KLM Royal Dutch Airlines backed out of a preliminary purchase agreement.
UAL already owns the Westin hotel and resort chain, the 18th-largest hotel chain in the world. Hilton International is No. 17.
The sale, which would make UAL one of the 10 largest hotel companies in the world with more than 60,000 rooms, is subject to regulatory approval. Neither the Federal Trade Commission nor the Justice Department could be reached on Tuesday to determine if the transaction would trigger any antitrust review.
The new agreement was reached after KLM’s board allegedly balked at a preliminary agreement to acquire Hilton International from Transworld for $975 million cash, according to an industry official and a spokesman for UAL.
Officials from Transworld Corp. and KLM could not be reached for comment late Tuesday night as to why their agreement fell through.
However, KLM’s pursuit of Hilton International, which also attracted bids from Trusthouse Forte and Beverly Hills-based Hilton Hotels Corp., surprised analysts, who noted that the airline is already committed to financing a new fleet of planes.
In an interview Monday, Bernard F. Combemale, chairman of Trusthouse Forte Inc., the U.S. division of London-based Trusthouse Forte PLC, said some hotel industry officials felt that KLM, which currently has no hotel interests, paid too much for the Hilton International chain.
UAL spokesman Matt Gonring said his company was told of KLM’s decision Tuesday, at which time UAL renewed discussions regarding purchasing the hotel unit.
UAL, which agreed to acquire Hilton International with 2.5 million shares of UAL stock, $200 million in debentures and $632.5 million in cash, indicated in a prepared statement Tuesday that there would be no layoffs of Hilton International’s 39,000 employees nor any name change of the venerable international hotel chain.
“An intergal part of the transaction is the experience and excellence of the Hilton International management team,” said UAL Chairman Charles Ferris. “I look forward to welcoming all the Hilton International employees to UAL Inc.”
Hilton International operates 84 hotels overseas as well as six in the United States, mostly under the name of Vista International.
“We became interested in Hilton International because its reputation for quality and service fits well with UAL Inc.’s other subsidiaries, United Airlines, Hertz and, most specifically, Westin,” Ferris said in his statement.
