ITT Split May End Hilton’s Takeover Bid
ITT Corp. may win court approval to split into three companies without shareholder consent next week, which would all but end Hilton Hotels Corp.’s $11.5-billion takeover attempt, legal experts and analysts said.
Hilton, which is based in Beverly Hills, wants to block ITT, saying the hotel and casino company must let holders vote on the breakup plan and its $70-a-share offer. New York-based ITT argues that it doesn’t need investor approval.
ITT’s main weapon is Nevada corporate law, which lawyers and legal analysts said calls for shareholder votes only when a company merges, is sold, dissolves or changes its articles of incorporation. ITT reincorporated in Nevada in 1995 from Delaware to take advantage of the state’s laws.
“My reading of the laws in those states is that you don’t need a vote to spin off parts of your company,” said Bernard Black, a Columbia University professor who specializes in merger and acquisition law.
John Fowler, a lawyer who helped write Nevada’s anti-takeover and business combination statutes, said shareholder votes are only called for in certain instances.
“The question may be whether this is a sale. That’s what the judge will have to decide,” he said.
U.S. District Judge Phillip Pro will hear Hilton’s motion on Monday and is expected to rule next week.
Analysts expect ITT to quickly separate its hotel and casino, telephone directory and technical-school businesses if it gets court and regulatory approvals. ITT also plans to buy back $2.1 billion in shares and take on $2 billion in debt.
Stephen Bollenbach, chief executive of Hilton, has said an ITT victory could end his eight-month effort to buy the Sheraton hotels and Caesars World casinos.
That’s because the resulting company, ITT Destinations Inc., would have staggered terms for directors, which would draw out a takeover attempt, and face a potential $1.26-billion tax liability if taken over, Hilton’s lawyers say.
“I feel good about our chances, but it’s impossible to predict what will happen in the courtroom,” he said.
Several investors in New York-based ITT have told Judge Pro they should have the right to vote on the company’s moves.
Regulators in two states where ITT has casinos--New Jersey and Mississippi--have approved the plans. Nevada officials on Friday delayed their decision until Pro’s ruling.
ITT has said its split-up plan is aimed at raising its share price, not at blocking a takeover attempt. Hilton, though, has said the move is really an attempt by ITT’s management to keep their jobs.
On Friday, ITT’s shares slipped 19 cents to close at $63, and Hilton’s shares fell $1.44 to close at $31.63. Both are traded on the New York Stock Exchange.
