Hilton to split into
hotel, casino units

Its gambling businesses have been struggling

Associated Press

BEVERLY HILLS, Calif. -- Hilton Hotels Corp. is splitting into separate hotel and casino units and will buy three Mississippi properties from Grand Casinos Inc. for $650 million.

The split, announced today, allows Hilton to free its more successful hotel holdings from its struggling gambling business. It follows recent two failed attempts by Hilton to merge with other hotel and casino operators.

Hilton's gambling business is the world's largest, with revenue of $2.6 billion last year, but the U.S. casino industry is performing poorly overall, in part due to fierce competition.

Hilton's new casino company, which has yet to be named, will acquire the three casinos from Grand Casinos using stock and also will assume $550 million of the Minnetonka, Minn., company's debt.

Grand Casinos will spin off its Indian casino management business and other assets to its shareholders as part of the deal.

Hilton Hotels has 260 hotels in the United States. The new casino company will have 18 casinos in Nevada, New Jersey, Mississippi, Louisiana, Missouri, Australia and Uruguay.

Hilton shareholders are to receive one share in each of the gaming and hotel companies for each share they own.

Grand Casinos shares dropped $1.50, or 8 percent, to close at $17 on the New York Stock Exchange after the announcement. Hilton shares closed down $2.75, or 4 percent, at $28.75.

Stephen Bollenbach, Hilton's president and chief executive, will keep his titles and serve as chairman of the new casino company. Arthur Goldberg, president of Hilton's gaming operations, will become the new casino company's president and CEO.

Hilton spent nearly all of 1997 trying to acquire ITT Corp., owner of the Sheraton and Caesars hotels and casinos, in a hostile attempt to create the world's No. 1 operator of hotels and casinos. Despite raising its offer twice to reach $10 billion, Hilton was unable to best Starwood Hotels & Resorts' $10.6 billion bid for ITT.

Just four months after losing out on ITT, Hilton in March began talks about acquiring hotel and casino operator Circus Circus Enterprises Inc. and splitting Hilton into separate hotel and casino companies. But those talks collapsed when the companies could not agree on price and other issues.

Hilton in Hawaii Manages and is 50% owner of the Hilton Hawaiian Village with 2,542 rooms. (Hilton Hotels Corp. is acquiring the other 50% interest from Prudential Insurance Co. of America.) Manages and part-owner of the Hilton Waikoloa Village on the Big Island with 1,241 rooms. Manages the Hilton Turtle Bay Resort on Oahu with 485 rooms.