Disney Chief Financial Officer Leaving to Become Hilton CEO

Stephen F. Bollenbach, the Walt Disney Co. financing whiz credited with helping persuade Chief Executive Michael Eisner last summer to ante up $19 billion to buy Capital Cities/ABC Inc., is leaving the company after only nine months to run Hilton Hotels as chief executive and president.

Bollenbach’s departure as chief financial officer, which marks his return to the hotel business, took Wall Street analysts and Disney executives by surprise when it was formally announced after U.S. financial markets had closed Friday.

Disney officials quickly filled the position with Richard D. Nanula, 35, who served as Disney’s chief financial officer for more than three years before being named president of Disney Stores Worldwide in November 1994. No successor for Nanula was immediately named.

At Hilton, Bollenbach assumes the helm of a firm that has angered investors in recent years with its on-and-off restructuring plans to sell the company or spin off operations. Although Bollenbach will be chief executive, the clear power at the company remains hands-on Chairman Barron Hilton, son of founder Conrad Hilton, who owns just under 25% of the firm.

Last month, Beverly Hills-based Hilton said it had rejected a plan announced only eight months earlier to spin off its large gambling operations into an independent company. The spinoff proposal was adopted after Hilton failed to find a buyer for the entire hotel and gaming operation. Hilton’s shares fell nearly 10% in one day as angry stockholders, who had been counting on a sale, responded to the spinoff proposal announced at the company’s annual shareholders meeting in April.

Raymond C. Avansino Jr., Bollenbach’s predecessor, abruptly announced his resignation last November, less than three years after joining the company. Avansino, who was expected to head Hilton’s independent casino-gambling company, cited personal reasons for resigning.

Before joining Disney, Bollenbach was president and chief executive of Host Marriott, which owned 100 hotels and operated concessions at toll roads and airports. He also played a major role in helping get New York real estate mogul Donald J. Trump out of his financial mess in the early 1990s.

All signs were that Hilton recruited Bollenbach and that he left because of the opportunity, although there was speculation Friday both inside of Disney and around Hollywood that Bollenbach was finding it too crowded in the corporate suites at Disney’s Burbank headquarters. Last August, longtime Hollywood agent Michael Ovitz was named Disney president, putting him second in command behind Eisner.

Bollenbach, who at 53 is the same age as Eisner, has scoffed at suggestions that he had any ambitions to run Disney, saying he couldn’t see Eisner leaving.

“Talk about succession is always silly because he’s not going anywhere,” Bollenbach said in an August interview with The Times.

In a statement, Eisner said Bollenbach “has spent his entire career preparing for the position he has been offered at Hilton.” Eisner has publicly credited Bollenbach with convincing him that Disney could easily take on more debt to buy Capital Cities/ABC, a deal that is expected to close later this month.

Cowen & Co. analyst Harold Vogel, who follows both Hilton and Disney, said, “Hilton had needed a strong chief executive with someone like Steve Bollenbach’s experience.” Vogel added that although Disney will miss Bollenbach, Nanula is well known to Wall Street and bankers.

At Disney, Bollenbach had an unusually powerful position, reporting directly to Eisner and having a seat on the board. Nanula will report to Eisner but is not expected to get a board seat.

In making the move, Bollenbach appears to be giving up some lucrative incentives to stay at Disney in the form of restricted stock.

According to a contract Bollenbach signed May 5, he was to receive 150,000 shares of restricted stock that would become unrestricted over time until Oct. 29, 1998. According to Bollenbach’s contract, he forfeits the shares if he voluntarily leaves Disney.

Ironically, Bollenbach gave up a good chunk of restricted stock when he left last spring as president and chief executive of Host Marriott to join Disney.

Barron Hilton and Bollenbach are scheduled to hold a news conference in Beverly Hills on Monday.

Avansino, a Nevada tax attorney and former gambling regulator, was hired to expand Hilton’s gaming operations, which had flourished during the late 1980s and early ‘90s while the hotel business sagged.

As the company pushed further into gaming, the hotel business staged a dramatic turnaround while casino profits dropped.