Hilton Gets Option to Buy Stock in Pay-TV Firm

Hilton Hotels Corp., owner of Doubletree and Hilton hotels, got an option to buy as much as $42.9 million in LodgeNet Entertainment Corp. stock for pay-television and Internet service in its hotel rooms. Beverly Hills-based Hilton received a warrant to purchase as many as 2.1 million LodgeNet common shares over the next seven years for $20.44 each, which would give it a 13% stake. Hilton will initially buy about 1.5 million shares, said LodgeNet Chief Executive Scott Petersen. LodgeNet will start offering movies on demand, Internet service and Nintendo video games in Hilton rooms by the end of the year. LodgeNet is the No. 2 U.S. provider of pay-TV service in hotels, offering it in the U.S. and Canada. The two companies said they will start a joint venture called InnMedia to sell high-speed Internet connections to hotels operated by Hilton and others.

Separately, LodgeNet said it expects sales of $198 million to $202 million this year on earnings before interest, taxes, depreciation and amortization (EBIDTA) of $67.5 million to $69 million. The firm didn’t detail per-share earnings. It was forecast to have $202.6 million in sales this year on $70.7 million in EBIDTA, a measure of the basic earning power of the business. LodgeNet is expected to lose $2.01 a share this year, according to First Call/Thomson Financial. LodgeNet shares fell $2.75 to close at $21.88 on Nasdaq; Hilton shares fell 19 cents to close at $10.25 on the New York Stock Exchange.