Hilton Hotels Corporation Agrees to Acquire Lodging Business of Hilton Group plc; Transaction to Make Hilton Hotels Corp. a Global Company for the First Time in 40 Years

Business Wire, Dec 29, 2005

The transaction will be financed with cash on hand at the time of the closing (estimated to be approximately $1.2 billion,) and a new bank facility. The financing is led by Bank of America and UBS.

The combined company will be headquartered in Beverly Hills, California, with Mr. Bollenbach as co-chairman and chief executive officer, Matthew J. Hart as president and chief operating officer, Robert M. La Forgia as senior vice president and chief financial officer, and the remainder of the HHC senior management team remaining in their current positions. Ian R. Carter, currently chief executive of Hilton International, will join HHC as executive vice president and chief executive officer of Hilton International, with responsibility for managing international operations reporting to Mr. Hart. Thomas L. Keltner, executive vice president and president of HHC's brand performance and development group, continues reporting to Mr. Hart in that position. HHC anticipates retaining the majority of HI's operating and development team as well as other executives.

Concurrent with signing the agreement, Mr. Michels resigned his position on the Board of Directors of HHC, and Mr. Bollenbach resigned his position on the Board of Hilton Group.

"HI has an experienced and talented team of professionals with unsurpassed knowledge of international markets, and as we have come to know and work with them during the successful eight years the alliance has been in place, we are excited about the role they and our existing management team will play in the future growth and prosperity of our company," Mr. Bollenbach said.

While many operational efficiencies have already been realized through the strategic alliance, HHC does expect to realize approximately $30 million in annual cost savings going forward. HHC also anticipates realizing a number of revenue enhancing synergies, primarily from new opportunities to grow its brands on a global basis, and worldwide implementation of HHC's proprietary "OnQ" technology system.

After creating the industry's first global lodging company under the leadership of company founder Conrad N. Hilton, HHC spun off its international business to shareholders in 1964. That business went through a number of owners, ultimately being acquired in 1987 by U.K.-based Ladbroke Group PLC. In 1997, Mr. Bollenbach - who had become HHC's CEO in 1996 - forged a strategic alliance with HI (the lodging subsidiary of Ladbroke) creating joint ownership of the Hilton HHonors guest loyalty program and Hilton Reservations Worldwide, and cooperative sales and marketing programs, presenting to the traveling public a united "Hilton" brand on a worldwide basis. Acknowledging the strength of the alliance and the Hilton brand name, Ladbroke subsequently changed its name to Hilton Group plc.

"As the alliance developed, benefiting both companies and our millions of global customers, we always envisioned the formal coming together of Hilton's domestic U.S. and international businesses," Mr. Bollenbach said. "The enthusiasm of both companies' Boards of Directors for making the new worldwide Hilton Hotels Corporation a reality has been a key element in this transaction, which we are confident will bring value to our guests, our team members, our owners and our shareholders for years to come."