One of the most acrimonious bidding wars of the mid-1990s, which pitted two of the nation’s leading hotel chains against one another, ended Wednesday when ITT Corp. stockholders overwhelmingly embraced a takeover offer by Starwood Lodging Trust.
The $10.2 billion stock and cash bid by the real estate investment trust trumped a competing offer from Hilton Hotels Corp., which had put ITT and its Sheraton hotel chain in play 10 months ago with a hostile tender offer. Starwood had been recruited as a white knight by ITT to fend off the hostile suitor.
The vote came at ITT’s annual meeting, which was held in an ornate ballroom of its plush St. Regis Hotel in midtown Manhattan. The unofficial tally showed more than 72 percent of stockholders supporting ITT and its current board of directors’ plan to accept the Starwood bid.
The decision by most institutional investors to support Starwood brought to a close the bitter war of words, advertisements and proxies that had been waged not only in the three firms’ boardrooms, but in court and on the pages of the nation’s financial press.
It was a public squabble lacking any of the dignity and charm of the classy hotels that were the object of the takeover battle. At one point, Hilton Chairman Stephen Bollenbach called ITT Chairman Rand Aroskog “a superweenie,” while Aroskog called Bollenbach “a drive-by takeover artist.”
But neither man was in the winner’s circle Wednesday. That spotlight shone on the balding pate of Barry Sternlicht, whose REIT has emerged in just the last few months as one of the nation’s leading hotel chains. In September, Starwood bought Westin Hotels & Resorts for $1.57 billion.
“We’re going to concentrate on building these brands,” Sternlicht said. He will sell off ITT’s remaining non-hotel assets.
In Chicago, the firm will operate at least 12 hotels: four from the Sheraton chain, three from the Westin chain and five it already owned and operated, including the Midland, the Tremont and the Rafael. The company currently operates 227 hotels with 79,945 rooms around the world.
The deal’s closing is projected for the end of January. According to Sternlicht, Starwood will closely monitor the performance of ITT’s gaming operations with the distinct possibility they might be sold. ITT recently completed a $1 billion expansion at its Caesar’s Palace facilities in Atlantic City, N.J., and Las Vegas. One of the last major objections by institutional investors to Starwood’s bid was its lack of experience in operating casinos.
One possible acquirer of the casinos, ironically, would be Hilton, which is already one of the largest gambling operators in the United States with its Flamingo Hotel and Bally’s Resort in Las Vegas. Hilton’s dream of becoming the undisputed leader in the industry had been one of the key reasons it launched its hostile bid for ITT.
“We’d love to talk to him (Sternlicht) about it (buying ITT’s casinos),” said Bollenbach. “It’s always a question of price.”
Price in the end is what caused Hilton to drop out of the bidding war, which had escalated wildly in the weeks leading up to Wednesday’s annual meeting. A Nevada federal court had ordered the company to hold the meeting, which had been postponed several times as ITT scrambled to either stay independent or come up with a white knight.
Throughout the battle, Hilton insiders suggested that it was Araskog’s ego that stood in the way of combining the two companies. The 66-year-old chairman will be ending his 31-year career at ITT.
During his reign, ITT transformed itself from the classic 1960s-style conglomerate into a focused hotel and gaming chain. Earlier this year, it sold off Madison Square Garden and New York’s Knicks and Rangers professional sports teams.
Hilton’s Bollenbach took the floor of the meeting to make a last-ditch appeal to ITT shareholders. “You will be participating in the potential of what will become the world’s greatest lodging and gaming company,” he said. “You will get the solid security of Hilton shares.”
But while analysts had offered differing values of the Starwood offer, the consensus put it around $85 a share, including up to $25.50 in cash. Hilton’s final offer was about $80 a share. When it launched its original bid, ITT was trading around $43 a share.
Despite the spat’s end, ITT shares fell far short of either bid Wednesday, sliding 81 cents, to $75.31. Starwood shares dropped 94 cents, to $54.31, while Hilton shares rose 25 cents, to $31.25.
A haggard Bollenbach said he was “disappointed” by the outcome after working exclusively on the takeover bid over the last 10 days. He said the vote hinged on two large institutions that at the last minute threw their support to Starwood. Fidelity and Alliance Capital, which rarely tip their hands on how they vote, are two of ITT’s largest stockholders.
Although ITT’s board can still accept a higher bid, no one was willing to predict Wednesday that somebody else might emerge. Hilton ruled out making a higher bid.
At the annual meeting, Araskog intimated there might have been a different outcome. When he first received a faxed copy of the letter with Hilton’s initial offer, he thought it read $85 a share. “This is something I am going to have to deal with,” he recalled thinking.
But in better light, he saw it said $55 a share. “If it had been $85, this could have all been different,” he said.
After the meeting, Bollenbach went up to Araskog and apologized for calling him names. Araskog accepted the apology.
