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Hilton buys Promus
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September 7, 1999: 10:51 a.m. ET
Hotel chain buys Doubletree, Embassy Suites operator for $4B including debt
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NEW YORK (CNNfn) - Hilton Hotels Corp., owner of New York's famed Waldorf-Astoria and other properties, will acquire Promus Hotel Corp. for $4 billion including the assumption of debt, the hotel operators said Tuesday.
The completed merger will create one of the largest lodging companies with nearly 1,700 hotels and about 85,000 employees.
Under the terms of the agreement, the Beverly Hills, Calif.-based Hilton (HLT) will pay $38.50 per share in cash for 55 percent of the shares in Memphis, Tenn.-based Promus (PRH). The remaining 45 percent of Promus shares will be exchanged for Hilton common stock.
Promus shareholders will have the choice of being paid in cash or Hilton stock, subject to proration.
Promus operates the Doubletree Hotels, Red Lion Hotels, Embassy Suites and other properties.
In a statement, Hilton officials estimated that the combined companies will have projected pro forma 2000 earnings before interest, taxes and other factors of about $1.3 billion and result in annual cost savings and operating efficiencies of $55 million for the first year and $90 million thereafter.
The boards of directors of both companies have approved the deal, which also requires shareholder consent.
Stephen F. Bollenbach, Hilton's president and chief executive officer, said the deal "brings together some of the most instantly recognizable, complementary and esteemed brand names to be found anywhere."
The merger is expected to completed by the end of the year.
Hilton said it expects to achieve annual growth of earnings before taxes and interest in excess of 10 percent and diluted earnings per share growth in excess of 20 percent over the next several years.
At the end of 1999, the new company will have about $5.4 billion in pro forma debt.
Morgan Stanley Dean Witter and Donaldson, Lukfin & Jenrette Securities Corp. were investment advisers to Hilton and Salomon Smith Barney advised Promus.
Hilton shares dipped 7/16 to 11-3/8 in early trading Tuesday, while Promus rose 3-1/2 to 34-7/8.
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Hilton
Promus
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