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Hilton may join Circus
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March 13, 1998: 3:54 p.m. ET
Hilton looks to expand with possible acquisition of Circus Circus casinos
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NEW YORK (CNNfn) - Hilton Hotels Corp., last seen as a jilted suitor for ITT Corp., is discussing a possible deal with Circus Circus Enterprises Inc. which could eventually create the country's largest gaming firm.
Hilton (HLT) said Friday the talks were centered around a transaction in which Hilton would split its gaming and lodging operations into two separate, publicly-traded companies.
Once that was accomplished, Circus Circus (CIR), a Las Vegas based casino and hotel company, would be folded into the resulting Hilton gambling firm.
Such a deal, if completed, would be an all-stock, tax free transaction, according to Hilton.
Last year, Hilton placed a $9.3 billion wager to acquire ITT (ITT) and its lucrative hotel and gaming properties. However, Starwood Lodging Trust ended up the winner with a $9.8 billion bid.
Hilton said that the discussions with Circus Circus are ongoing but cautioned that no agreement has been reached and many details remain to be worked out.
A Hilton-Circus combination would create a powerful force in the gambling industry, with a major concentration of properties in Las Vegas, the largest gambling market in the United States, including the Las Vegas Hilton, Flamingo Hilton, Luxor, Excalibur and Circus Circus-Las Vegas.
For its part, Circus would gain entry into the Atlantic City market via Hilton's properties in that New Jersey city. Atlantic City is the second-largest gambling market in the United States.
"The real hidden value here is the lodging business," said Jason Ader, gaming analyst at Bear Stearns, who said it was a win-win situation as Hilton's surging hotel unit could unleash itself from its struggling gaming interests, which have been hurt by a glut of gambling offerings in Las Vegas and elsewhere.
"Circus is facing issues that could hamper their profits in the coming future. I don't think there's any danger that Hilton is going to overpay. As a Circus shareholder, I think you're better off as part of a larger company."
Rumors also surfaced Friday that Hilton was pondering an acquisition of British hotel and gaming operator Ladbroke Plc. According to reports, Hilton was also considering merging its hotel operations with Ladbroke.
Ladbroke was granted the rights to the Hilton brand name overseas, a move which proved to tie Hilton's hands in attempts to expand into lucrative international markets. Either way, the move would bring Hilton's name back into the fold.
A spokesman for Ladbroke refused to talk about such a possible deal, saying the company "does not comment on rumor or speculation." Hilton also declined to comment on it.
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