Hilton Hotels May Be on Verge of Shedding Non-Casino Operations
As Hilton Hotels Corp. prepares for its annual shareholder meeting next week, talk is growing about the possible sale or breakup of the venerable Beverly Hills-based hotel and casino operator.
Industry observers say Hilton is moving toward spinning off its well-known chain of more than 200 hotels and concentrating on its smaller--but highly lucrative--gambling operations. Those include five Nevada hotel-casinos, a New Orleans riverboat casino, and interests in casinos in Canada, Australia and Turkey.
Gambling generated more than 70% of Hilton’s profit in the early 1990s, while the hotels suffered during a deep industry slump. In 1994, gambling provided 57% of the firm’s $276.9 million in operating income.
Last month, Business Week magazine reported that money managers were convinced that a major British company involved in the hotel and gambling business was interested in making a bid of between $90 and $100 a share for Hilton.
One firm that appears to fit that bill is London-based Ladbroke Group. Ladbroke owns Hilton International, which operates hotels under the Hilton name outside the United States. Meanwhile, the heart of Ladbroke is a gambling empire that includes more than 1,000 betting shops in Britain, London casinos and several U.S. horse racetracks, including Golden Gate Fields near San Francisco.
“It doesn’t surprise me,” hotel industry consultant Bruce Baltin said Thursday of speculation about Ladbroke’s interest in all or part of Hilton.
“Ladbroke is a firm that has been fairly aggressive in terms of expanding in the hotel industry. It would also make sense with the globalization of the (hotel) industry,” said Baltin, of PKF Consulting in Los Angeles. “It would be interesting to combine companies that were once (broken up) 30 years ago.”
Ladbroke officials in the United States were not available for comment, and Hilton spokesman Mark Grossman would not discuss the possibility of talks with the British firm.
Hilton shares fell $2.25 on Thursday to close at $77 on the New York Stock Exchange. While that is well below the range of the speculated offer, it is about $20 a share more than Hilton was selling for in mid-November, when the company announced the hiring of investment banker Smith Barney to study and recommend “strategic alternatives.”
Among the options Smith Barney was asked to consider were “a sale of the entire company in one or a series of transactions, spinoff of one or more of its businesses, recapitalization, business combination, share repurchase program or (a) similar transaction.”
Grossman said Thursday only that the “process of studying options for shareholder value is well under way.” The company will hold its annual meeting next Thursday in Beverly Hills.
Many industry analysts are dubious that Ladbroke--or any other potential suitor--would be able to close a deal with Hilton and its chairman, Barron Hilton, who owns about 24% of the company’s stock.
The company has been the subject of takeover rumors since 1989, when Hilton last put itself up for sale. Then the worldwide recession and hotel glut wiped out any hopes of rich offers from foreign investors, particularly the Japanese, who had been on a buying binge.
“It’s like the boy who cried wolf,” Philadelphia gambling industry analyst Marvin Roffman said of the Hilton takeover rumors over the years.
