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Ladbroke Agrees To Acquire Hilton International for $1.1 Billion

September 4, 1987

LONDON (AP) _ A British company known more for gambling than hotels announced an agreement Friday to buy Hilton International Co. for $1.1 billion in cash, the latest in a spate of British acquisitions of U.S. companies.

Ladbroke Group PLC is buying the 91-hotel chain from Allegis Corp., which wants to sell off its non-airline businesses. The Chicago-based Allegis is the parent of United Airlines, the Hertz car rental system and Hilton International and Westin International hotels.

Hilton International is not related to Hilton Hotels Corp. of Los Angeles, a publically owned company that operates Hilton hotels in the continental United States.

The purchase of Hilton International would catapult Ladbroke into the big league of the hotel industry with a world-famous brand name and a combined 153 hotels.

Ladbroke, a London-based conglomerate with interests in betting, hotels, travel, property development and retailing, said it would finance the acquisition by raising approximately $420 million through a stock sale and the rest from bank loans.

Ladbroke announced last week that it was interested in acquiring Hilton International, which was pursued by several suitors.

″To have secured Hilton at a reasonable price is a great coup for Ladbroke,″ said Ladbroke Chairman Cyril Stein

Spurred by the weaker dollar, British bidders have been snapping up American targets at an increasing rate in recent months.

Other deals in recent months include:

-Hanson Trust PLC’s agreement to pay $1.7 billion for Kidde Inc., which makes Jacuzzi whirlpools and other products.

-Blue Arrow Inc.’s $1.3 billion pending purchase of Manpower Inc., the world’s biggest part-time help agency.

-WPP Group PLC’s takeover of the much bigger JWT Group Inc., parent of the world’s fourth largest advertising agency, for $566 million.

Ladbroke said it plans to use the Hilton brand name on some of its own 62 hotels, 53 of which are located in Britain. The rest are on the European continent.

″You don’t get the opportunity to buy the brand name in the industry very often,″ said John Harounoff, a spokesman for Ladbroke.

Securities analysts gave positive marks to the deal.

″It is going to put them in the big league,″ Nigel Reed, an analyst at the stockbrokerage firm of Kitcat and Aitken, said of Ladbroke. ″It is a good deal for both companies.″

Ladbroke’s existing hotels will benefit from being part of Hilton International’s reservation system, and renaming its hotels to the Hilton name will allow it to charge higher prices, Reed said.

Rebecca Munns, an analyst at Scrimgeour Vickers and Co., said, ″Hilton has been well managed but could be better marketed.″

Hilton International’s top management has agreed to stay on, Ladbroke said.

Ladbroke will make Hilton International’s marketing emphasis more worldwide, rather than focusing on Americans traveling abroad as Hilton International has tended to do, Harounoff said.

Hilton International’s pre-tax profit fell 21 percent to $47.6 million on a revenue gain of 7 percent to $754.5 million in 1986, according to Allegis. The chain cut room rates last year to attract tourists, many of whom shunned Europe because of terrorism fears.

Allegis did not break out Hilton International’s profits so far for 1987, but Hilton Intenational said it was having a good year.

Ladbroke’s pre-tax profit soared 35 percent to the equivalent of $167 million on a revenue increase of 38 percent to $3 billion last year.

Hilton International was formed as a separate subsidiary of Hilton Hotels in 1949. In 1964, Hilton International was spun off as an independent public company and was given the exclusive right to use the Hilton name outside the United States.

Hilton International was acquired by Trans World Airlines Inc. in 1967, which sold the chain to Allegis in April of this year.

The 91 hotels Hilton International operates have more than 35,000 rooms and are located in 44 countries. Twenty-seven are in Europe.

In the United States, it operates Vista hotels in New York City, Washington, D.C. and Pittsburgh, It also operates the Drake hotel in Chicago and the Kahala Hilton in Honolulu.

Hilton International, which has 40,000 employees, owns 10 of the hotels, leases 39 and operates the remaining 42 management contracts for which the company receives a percentage of revenues and operating profits.

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