Hilton Shares Seesaw on Merger Details

Hilton Hotels Corp. shares had a bumpy ride Wednesday, rising quickly in heavy trading early in the session to as high as $11.50, then settling down to $10.31, up 25 cents over Tuesday’s close, when trading was halted at 3:12 p.m. EST pending an announcement from the Beverly Hills-based company. Analysts characterized the stock price movement as a technical adjustment related to the terms of Hilton’s $3.7-million cash-and-stock acquisition of Promus Hotel Corp., completed Tuesday, and said it did not represent any fundamental changes in the company’s business or operations. “Arbitrageurs . . . bought Promus shares with the expectation of receiving a certain number of Hilton shares. When the final terms of the deal were established, there was a larger cash component and a smaller stock component than was expected,” said Bear, Stearns & Co. analyst Robert LaFleur. “The arbitrageurs had to go into the market to buy Hilton shares to make up that portion of their position which would not be covered when the deal closed,” he said. More than 13 million Hilton shares changed hands Wednesday, making it the second-most active issue on the New York Stock Exchange behind America Online Inc. Early Wednesday, Hilton issued a statement saying its first proration calculation was incorrect and then issued a revision, which eased buying pressure and sent the stock price lower before trading was halted, pending news of the second proration. “In the long term, it’s sort of a nonissue,” LeFleur said. “Going forward, the artificial influences of the merger and arbitrageurs are all unwinding themselves, and Hilton stock will trade based on the strength of this new company.”