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Hilton Re-United As UK Group Seals GBP 3bn Hotels Sale

Posted on: Friday, 30 December 2005, 09:00 CST

By Martin Flanagan City Editor

BRITAIN'S Hilton Group yesterday agreed to sell its hotels business to Hilton Hotels Corp (HHC) of the United States for GBP 3.3 billion in a deal that will see the British company renamed as Ladbrokes to reflect its remaining bookmaking business.

However, David Michels, outgoing chief executive of Hilton Group, who will not have a post at the new Ladbrokes, acknowledged that the board of the latter would have a duty to consider any takeover offers.

Michels said: "It has to be an option that the board considers any offer that comes to the company."

Hilton Group admitted last week, in the middle of its negotiations over the hotels arm, that it had received several "expressions of interest" in Ladbrokes.

Industry sources say these included approaches from BC Partners, Blackstone and CVC Capital which could value the gambling chain at between GBP 3bn and GBP 4bn.

Hilton Group also revealed yesterday that "a substantial amount of cash" would be returned to shareholders early in the second quarter of 2006 following a review of the appropriate capital structure of the new Ladbrokes.

Sir Iain Robinson, the chairman of Hilton Group, who is also a former chief executive of ScottishPower, said: "We believe this transaction delivers significant shareholder value. The board is fully committed to Ladbrokes, which it believes is a strong and valuable business which will be well placed to deliver growth and good returns."

Robinson will continue as chairman of Ladbrokes, while Christopher Bell, formerly chief executive of Ladbrokes Worldwide, will become chief executive of the new company.

Rosemary Thorne, a former finance director of Bradford & Bingley mortgage bank and Sainsbury, will become finance director of Ladbrokes.

Asked if the new company would be in transition before being acquired by a private equity company, Bell said: "We are in here for the long haul.

"We have a very successful company and my job is to make it even stronger."

The hotels deal reunites the Hilton brand after more than 40 years. The Hilton business split in 1964, with the US company running all Hilton hotels in the US and the UK group operating the brand elsewhere around the world.

Michels and Hilton Group finance director Brian Wallace have agreed to join HHC on three-year contracts, but without board membership, to help advise the American group on its international plans.

Wallace said the price Hilton Group had received for the hotels, at 13 times underlying earnings in 2005, was "at the high end of the range for hotel deals".

Stephen Bollenbach, chairman of HHC, said: "This transaction represents the final and logical step in a process that began in 1997 with the signing of a strategic alliance between HHC and Hilton International as a global lodging industry leader."

US-based Hilton owns, manages and franchises more than 2,300 hotels, while the two Hilton companies operate a joint venture to expand the luxury Conrad brand, named after the company's founder, which has about 20 hotels.

Yesterday's deal is expected to trigger an as yet unquantified share options windfall for Hilton directors following the sale.

Closing a 40-year circle

THE GBP 3.3bn hotels deal reunites the Hilton brand after more than 40 years.

Founder Conrad Hilton bought his first hotel in 1919. He died in 1979, aged 91, having made his name a symbol of the post-Second World War style of luxury hotel where globe-trotting Americans felt at home.

The Hilton business split in 1964, with the US company running all the hotels in America and the British company operating the brand elsewhere.

British betting group Ladbrokes acquired the Hilton business outside the US in 1987 from Allegis.

Hilton Group's Hilton International runs 403 hotels, with 261 branded Hilton and 142 under the mid-market Scandic brand.

In 2004, Hilton International made a profit of GBP 173 million.

Source: Scotsman, The

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