Hilton May Buy 5% Stake in British Firm
Seeking to boost its relatively small presence in fast-growing foreign markets, Hilton Hotels Corp. on Thursday said it has tentatively formed a global marketing and financial partnership with Ladbroke Group, a British gaming and lodging company.
Hilton said it would buy a 5% stake in Ladbroke and revive its relationship with the Ladbroke-owned Hilton International chain, a worldwide network of about 160 hotels spun off by Hilton 32 years ago and acquired by the British company in 1987. Additionally, Beverly Hills-based Hilton and Ladbroke would together build and buy certain hotel and gaming projects, splitting the costs and profits. Under the arrangement Ladbroke can also buy a stake in Hilton, but it did not reveal any immediate plans to do so.
“One of our stated growth objectives has been to leverage the powerful Hilton brand name by expanding our international presence,” Hilton President and Chief Executive Stephen F. Bollenbach said in a statement. “This agreement with Ladbroke is a significant step toward achieving that goal.”
On the New York Stock Exchange, Hilton shares fell 50 cents to close at $106.50. In London, Ladbroke shares closed at $3.26, up 3 cents.
The new relationship would help Hilton catch up to rivals with many more international properties. Hilton owns or operates 226 hotels in the U.S. but only nine foreign properties. Those operate under the Conrad International name, derived from the name of the company founder, Conrad Hilton. The company has also been prohibited from using the well-recognized Hilton brand name in foreign markets under terms of the 1964 spinoff of Hilton International to shareholders.
Industry analysts said they expect the immediate financial benefits of the alliance to be relatively small, amounting to perhaps an additional $20 million to $30 million a year in pretax profit for Hilton. However, they said the partnership would help keep Hilton competitive and might lead to a merger down the road.
The tentative agreement announced in London, where Ladbroke is headquartered, comes after months of negotiations that had triggered rumors of a Hilton takeover of Ladbroke. But the firms eventually dismissed a takeover as too costly and complicated, settling instead on a joint venture to market the Hilton name worldwide and build new properties.
The two companies plan to connect their reservation systems and share Hilton’s frequent-guest program, which rewards repeat customers with upgraded rooms and other benefits. Bollenbach and Ladbroke Chief Executive Peter George would get a seat on each other’s boards.
