Hilton Advises ITT Against Rushing to Sell Off Assets
Hilton Hotels Corp. on Thursday urged ITT Corp. not to quickly sell assets unrelated to its hotel and casino businesses as a way to fend off Hilton’s $10.5-billion hostile bid.
However, ITT said it sold nearly half of its 5% stake in Alcatel Alsthom, the big French telecommunications company, in what may be the first of several asset sales aimed at thwarting Hilton’s takeover plans.
ITT and Alcatel declined to discuss the sale price, but a source close to ITT estimated it to be near the market value of about $300 million.
In a letter, Hilton Chief Executive Stephen Bollenbach said he was concerned by reports in the media quoting unnamed sources saying that ITT would “unload” assets such as its 50% stake in Madison Square Garden and the New York Knicks and Rangers sports teams. ITT said Wednesday that it plans to focus on its casino and hotel businesses, and French telecommunications company Alcatel Alsthom said ITT recently cut its stake in the company.
ITT shares rose 62.5 cents to close at $58.25 on the New York Stock Exchange, however, as investors speculated that selling assets would increase ITT’s value because the proceeds could be invested in its faster-growing casino and hotel businesses.
“By ridding themselves of lower-return assets and reinvesting the proceeds in higher-returning assets, ITT gets the benefit of a bump in the stock,” said Dan Shannon, a fund manager at STI Capital, which owned 562,00 ITT shares Sept. 30.
Hilton shares fell 12.5 cents to close at $27.50, also on the NYSE.
On Wednesday, ITT rejected Hilton’s unsolicited offer, calling the proposal inadequate and vowing to stay independent by focusing on its Sheraton hotel chain and Caesars World casinos.
Hilton launched a tender offer last month for 50.1% of ITT’s shares for $55 each. The Beverly Hills-based company is also planning to wage a proxy fight to replace ITT’s board with its own slate of directors.
In his letter, Bollenbach said a Hilton-controlled sale of ITT’s noncore assets would command better prices and benefit ITT shareholders.
ITT’s “announced intention is to sell them at a fire sale,” he told Bloomberg News. Shareholders “ought to be given the opportunity to decide who would be better at doing it.”
New York-based ITT declined to comment.
ITT said this week that it would likely sell its stake in Madison Square Garden and the Rangers and Knicks, which analysts value at about $600 million.
Investors said they tend to agree with Bollenbach that a quick sale by ITT of its peripheral assets to generate cash could hurt ITT shareholders.
“I don’t think they will destroy shareholder value by selling it too fast,” said Erick Lucera, an analyst at Independence Investment Advisors, which owned 1.66 million ITT shares Sept. 30.
Investing in its casino and hotel businesses, buying back shares or paying down debt are all moves that could force Hilton to raise its bid, analysts said.
