Newspaper article The Florida Times Union

Suite Deal for Hilton Hotel Company Buys Promus Chain, Expands Market

Newspaper article The Florida Times Union

Suite Deal for Hilton Hotel Company Buys Promus Chain, Expands Market

Article excerpt

LOS ANGELES -- Hilton Hotels Corp. is buying Promus Hotel Corp. for $3.1 billion in a cash-and-stock deal that expands Hilton's market reach to include nearly 1,700 establishments, ranging from New York's luxurious Waldorf-Astoria to the mid-priced Hampton Inn chain.

The acquisition announced yesterday also gives Hilton a large stake in the all-suites segment of the lodging market, geared toward business travelers who stay for extended periods. Promus brands include the Embassy Suites Guest Suites, Homewood Suites, Red Lion, Doubletree and Club Hotel by Doubletree chains.

The companies have been talking about a combination since July, said Stephen F. Bollenbach, president and chief executive of Hilton.

"The more we worked on it, the clearer it became the economics of consolidation were so compelling and so good for our shareholders and their shareholders that it was a transaction we had to pursue," Bollenbach said in a conference call with reporters.

The deal is expected to provide $55 million in cost savings the first year of operation for the combined companies, and $90 million in following years. Promus had $1.1 billion in revenues in 1998, with Hilton taking in $1.8 billion for the same period.

Hilton will pay $38.50 per share for 55 percent of Promus shares. The rest of Promus' stock will be exchanged for Hilton common stock equivalent to $38.50 per share. Hilton will also assume $900 million in debt.

Promus shares rose 3 7/16 to 34 13/16 in trading on the New York Stock Exchange. Hilton shares dropped 5/8 to 11 3/16 on news that the cost of the acquisition would hurt Hilton's earnings in 2000.

The deal puts Hilton in a better position to compete with rivals including Marriott International Inc. and Starwood Hotels and Resorts, analysts said. However, it will take several years for Hilton shareholders to realize any gain. …

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