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ITT wins proxy battle
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November 12, 1997: 6:15 p.m. ET
Shareholders vote to keep ITT directors, dealing blow to Hilton
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NEW YORK (CNNfn) - ITT Corp. shareholders voted Wednesday to re-elect its current board of directors, signaling an end to one of the nastiest corporate takeover attempts in history.
Based on preliminary returns, ITT Chairman and Chief Executive Rand V.Araskog told crowds of shareholders at the end of Wednesday's annual meeting the 11-member board was approved by "a substantial margin."
The vote all but ended Hilton Hotels Corp.'s 10-month hostile takeover and assured that ITT would be acquired by rival bidder Starwood Lodging Trust.
"It's a big day for our shareholders. There's no question about that," Araskog said, adding it was a "bittersweet experience."
ITT watchers had anticipated a close vote leading up to Wednesday's showdown, but a preliminary tally showed nearly two-thirds of voting shareholders backed ITT's slate of directors. A final tally is expected to be available in the next few weeks.
Araskog said the company's slate was favored by institutional investors, retail shareholders, and surprisingly, many arbitrageurs, who many observers thought would side with Hilton's $9.3 billion cash and stock bid. Starwood had initially offered $9.8 billion in cash and stock for ITT but raised it last week to $10.2 billion.
The vote represents a big blow to Hilton, which had hoped to replace ITT's directors with its own slate and then merge ITT's hotel and gaming operations with Hilton's to create the world's largest gaming and lodging concern.
Hilton Chief Executive Stephen Bollenbach said if the preliminary results are confirmed, Hilton will withdraw its bid and move on. Previously, he said Hilton's board of directors would consider a substantial stock repurchase plan if he lost the ITT proxy battle.
Hilton launched its hostile takeover of ITT last January, igniting a nasty feud as ITT tried to fend off Hilton with asset sales, restructurings and finally a white knight offer from Starwood Lodging, a real estate investment trust that owns the Westin hotel chain.
Bollenbach said Hilton would be interested in acquiring ITT's casino properties such as Caesars World, if Starwood wanted to sell them.
Hilton's retrenchment leaves Starwood with the apparent winning bid of $10.2 billion, despite the fact that its bid is fully taxable.
"Our merger is a vote for disciplined growth," Starwood Chairman and Chief Executive Barry S. Sternlicht told shareholders.
Crucial to ITT's victory was the presence and support of Sheraton franchisees.
Some franchisees had feared that Hilton would spin off the Sheraton brand name to HFS Inc. Franchisees believed the move would jeopardize their investments, according to Eric Friden, president of Friden Hotels Co., which is the second-largest franchisee of Sheraton hotels in North America.
"The Hilton stated position of spinning off the brand name will diminish the value of our Sheraton property," Friden told reporters shortly before the shareholders meeting began.
Added Harold Pollin, a board member of the Association of Sheraton Franchisees of North America: "We believe that if Starwood is the successful bidder, the positive momentum recently demonstrated by the ITT Sheraton brand will continue."
Franchisees account for 75 percent of Sheraton properties in North America and make up a "significant portion" of ITT's earnings, according to Pollin's association.
Starwood still faces much of an uphill climb, trying to incorporate Sheraton's 400 hotels while trying to integrate Westin's 100-plus units. In addition, the REIT must win approval from New Jersey casino regulators to operate the Caesars unit in Atlantic City.
"We hope to close the transaction, as we stated, in late January," Sternlicht said at a news conference following the meeting.
"It's better operationally to close this transaction for both companies' organizations as fast as possible," Sternlicht said.
His sentiments were echoed by ITT President and Chief Operating Officer Robert Bowman.
"We want to move expeditiously," he said. -- by staff writer Robert Liu
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