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Hotels and motels

Hilton Hotels Corporation Announces Spinoff of Casino Operations

Strategic Insights

— 1 min read

Beverly Hills, California-based Hilton Hotels Corporation made headlines yesterday with the announcement of its plans to spin off its casino operations to shareholders. This move comes after a tumultuous period, marked by speculation about a potential sale of the entire company. The spinoff is intended to allow both the casino and hotel businesses to develop and operate more effectively. Analysts anticipate that the spinoff will be completed by the end of the year.

Key Takeaways:

  • The spinoff is expected to be completed by the end of the year through a tax-free distribution of stock to shareholders.
  • Casino operations accounted for nearly 60 percent of the company's operating income in 1994, while hotel operations accounted for the rest.
  • Analysts Steven Eisenberg and Joyce R. Minor anticipate a combined stock price of $65 or $66 a share, with shares in the hotel company trading at $40 and those in the gambling operation at $25 or $26.
  • The company owns 18 hotels, has a stake in 15 others, manages 24, and franchises more than 160 hotels, totaling 80,000 rooms.
  • ITT Sheraton, a unit of the ITT Corporation, and Host Marriott are among the companies that looked at Hilton, but were deterred by the asking price or wanted only part of the company.
  • Barron Hilton, the 67-year-old chairman, owns 24.4 percent of the stock and is concerned with safeguarding the legacy of his father, Conrad N. Hilton.
  • The Conrad N. Hilton Fund, a charity, controls an additional 8.6 percent of the stock.

Statistics:

  • The company's stock price fell $6.50 yesterday to close at $71.25, after having risen to $77.75 on Wednesday due to speculation about a sale.
  • Hilton's earnings before interest and taxes increased 28 percent in the first four months of 1995, to $109.1 million from $84.7 million in the corresponding period a year earlier.
  • Net income during the period rose 40 percent, to $49.4 million, or $1.02 a share, from $35.4 million, or 73 cents.

Sources:

  • Smith Barney
  • Oppenheimer & Company (Steven Eisenberg)
  • Duff & Phelps Equity Research (Joyce R. Minor)
  • Bloomberg Business News ( quotes from Barron Hilton)
  • Cowen & Company (Harold Vogel)

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