HILTON/10″/mike1st/mark2nd
No. 20
Hilton Splits Into Two Companies
For the better part of two years, Hilton Hotels Corp. President Stephen Bollenbach and gaming operations chief Arthur Goldberg had been looking for ways to boost the value of the company’s stock, which was sagging because of intense competition in the gaming industry. Their first two attempts fell flat: Hilton lost a year-long hostile bid for ITT Corp., and in March, a planned merger with Circus Circus Enterprises Inc. fell through.
Then in June, Bollenbach and Goldberg put together a deal that shows promise of getting done.
It involves Hilton splitting off its gaming operations into a separate company and acquiring Minnetonka, Minn.-based Grand Casinos Inc. The gaming operations of both companies would then be folded into a separate company, to be called Park Place Entertainment Corp.
The idea is to separate Hilton’s more-profitable hotel operations from its sagging casino operations. IRS rules allow such a split to be undertaken tax-free as long as there is a simultaneous acquisition; hence the buyout of Grand Casinos.
But the deal has so far failed to provide the intended boost to Hilton’s stock; in fact, shares have fallen from $31.50 on the day the deal was announced to $20.06 as of last week. (It has, though, rebounded from its 52-week low of $12.50.)
Grand Casino’s stock has not fared any better: It has fallen from $18.50 on the day of the deal to $8.75 as of last week. Analysts say the slump in the gaming industry is largely to blame. Meanwhile, the split of Hilton’s gaming and hotels businesses was slated to close Dec. 31. The deal has been approved by the Securities and Exchange Commission, the IRS, Hilton and Grand Casino shareholders. But as of last week, approval still had not come from regulators in Missouri and Louisiana, where Hilton has riverboat gaming operations.
Howard Fine
