ITT, Hilton Prepare for Takeover Battle

With both sides preparing for a takeover battle, ITT Corp. on Wednesday said its board of directors will review Hilton Hotels Corp.’s unsolicited takeover bid next week, while Hilton tried to limit ITT’s legal flexibility.

ITT, which owns the Sheraton hotel chain and Caesars Palace in Las Vegas, will have a regularly scheduled board meeting Tuesday, where it will “discuss all issues,” a company executive said. ITT has said it would respond within 10 days to Hilton’s $10.5-billion takeover proposal, which was announced earlier this week.

Meanwhile, Beverly Hills-based Hilton met with mixed results in preemptive legal maneuvering. A Nevada federal court on Wednesday agreed to review Hilton’s request to prohibit ITT from increasing the size of its board or interfering with the election of its directors to stymie Hilton’s efforts. The court hearing is set for Feb. 5.

The court rejected Hilton’s effort to prevent ITT from potentially filing legal challenges to the takeover outside of the Nevada federal court district. Hilton sought such a ruling to limit duplicate and possibly inconsistent legal rulings, the company said. The court said Hilton could seek such an injunction only after ITT had filed a suit.

Hilton has proposed buying ITT for $6.5 billion in a combination of cash and stock and would take on about $4 billion in ITT debt. Hilton executives are considering a bank loan or bond sale to raise about $3 billion to help pay for the ITT bid, said company spokesman Marc Grossman.

“Given the companies involved, I don’t see a problem with them raising significantly more than $3 billion,” said Keith Barnish, head of loan syndications at San Francisco-based BankAmerica, one of Hilton’s leading lenders.

Hilton plans to file its official tender offer for ITT stock with the Securities and Exchange Commission by Friday, said Grossman. Hilton has offered $55 a share, half in cash and half in stock.

Hilton and ITT lined up some of Wall’s Street’s top investment bankers and lawyers to advise them on their takeover battle.

Donaldson, Lufkin & Jenrette Inc., one of the leading investment banks serving the gaming industry, is takeover advisor to Hilton, Hilton said. Sources say ITT is being advised by two investment banks well known for helping companies defend against hostile takeovers, Lazard Freres & Co. and Goldman, Sachs & Co.

Wachtell Lipton Rosen & Katz, a New York law firm with a big merger practice, is on Hilton’s side, along with Los Angeles-based Latham & Watkins. Cravath Swain & Moore, another top New York firm, is ITT’s lawyer.

Hilton shares rose $1.125 to $29 on the New York Stock Exchange; ITT rose 75 cents to $57.625, also on the NYSE.