Hilton Will Resume Hostile Bid for ITT

Barely two days after beginning takeover talks, Hilton Hotels Corp. on Thursday withdrew from discussions with ITT Corp. and accused it of favoring an existing $13.3-billion offer from Starwood Lodging Trust.

Beverly Hills-based Hilton said it will instead pursue its 9-month-old, $12.8-billion hostile bid as it also tries to oust ITT’s board of directors at an annual shareholders meeting next week. Hilton also vowed to drop the takeover effort if it loses the proxy fight Wednesday.

Hilton said it broke off two days of talks because ITT wouldn’t give it the same access to financial records as Starwood--a claim that ITT denied.

As a result, ITT released Mirage Resorts Inc. and buyout firm Kohlberg Kravis Roberts & Co.--both of which had expressed interest in buying ITT--from confidentiality agreements. Hilton had requested the move, which led to widespread expectations that KKR or Mirage may join forces with Starwood or Hilton.

KKR and Mirage both declined to comment.

The latest salvos in the 10-month fight between Hilton Chief Executive Stephen Bollenbach and ITT Chairman Rand Araskog come as ITT tries to escalate a bidding war. ITT’s directors said neither Starwood’s stock-heavy offer of $82 a share, nor Hilton’s offer of mostly cash are their best.

“A fair bid starts at $100,” said Michael Price, chief executive of Franklin Mutual Fund Advisors, which owns about 2 million ITT shares. Price said he hasn’t decided which company’s board he will support.

In a telephone interview with Reuters, Bollenbach said his company had been “hoodwinked” by ITT.

“Finally, after 10 months, we get a chance to talk and they don’t talk. It’s all just a trick on us,” he said. By entering discussions, Hilton had hoped to gain access to financial data and convince the ITT board that its offer was more valuable than Starwood’s.

ITT vehemently denied the accusations, saying it had provided Hilton with the same information that it had given to Starwood and challenged Hilton to specify any data that had been denied.

“We categorically deny Mr. Bollenbach’s claims,” said spokesman James Gallagher, adding that ITT took “tremendous offense” at the allegations.

New York-based ITT said its board is committed to getting the highest bid. Araskog said the annual meeting in New York shouldn’t be viewed as a referendum on the two current offers and that the auction will continue if his board is reelected.

Bollenbach, though, set Wednesday as the deadline.

“Hilton will not participate in any auction or sales process with the current ITT board after the annual meeting,” Bollenbach wrote in a letter to ITT’s directors.

In New York Stock Exchange trading, shares of ITT fell 63 cents to close at $79.63. Hilton’s shares rose 19 cents to close at $31.63, and Phoenix-based Starwood’s shares fell $1.44 to close at $58.81.

Starwood Chairman Barry Sternlicht didn’t indicate whether he’ll raise his bid. He said he’s talked with many of ITT’s largest institutional investors, who “like my stock and want it more than cash.”

“We don’t want to put more stock out than we have to,” he said on CNBC.

Hilton and Starwood covet ITT’s Sheraton hotels and Caesars World casinos. The winner will become the largest hotel chain.