Key ITT Assets Would Probably Go

A successful bid by Hilton Hotels Corp. would probably end a three-year mission by ITT Corp. to create a new form of entertainment empire linking hotels, gaming, sports and television interests under a common banner.

Analysts predict that if Hilton succeeds in its bid, it will sell off many of the assets ITT has paid handsomely to assemble in building upon its Sheraton hotel core, including Madison Square Garden, the New York Knicks and Rangers sports teams and a UHF television station in New York.

Hilton said it would review such assets, pointing out Monday that the sale of “nonstrategic assets” outside the combined companies’ gaming and lodging mainstay could help reduce debt.

But ITT is not likely to give in without a fight, calling on such defenses as the classic “poison pill” anti-takeover device that is part of its corporate bylaws.

“They’ll fight this, and at the least should be able to get a higher price,” said Harold Vogel, an analyst at Cowen & Co. who has been recommending ITT shares.

The news of Hilton’s hostile bid drove ITT shares up $14.75 to close at $58.50 on the New York Stock Exchange. Vogel said the company may ultimately be purchased for $5 to $6 a share above Monday’s closing price.

Hilton’s bid came at a time when ITT has been trading at its 14-month low on Wall Street--far below its initial offering price. The predecessor company split into three publicly traded stocks in December 1995, concentrating on insurance, industrial businesses and entertainment. The plan was designed to free faster-growing assets from more mature smokestack and finance operations.

The entertainment group kept the ITT name and existing management--Rand Araskog, ITT’s long-standing chairman, and Robert Bowman, the president and chief executive, who is credited on Wall Street with masterminding the split and moving the hotel arm into entertainment.

The idea was to capitalize on the millions of guests who stay at Sheraton by selling them various forms of entertainment owned by ITT--from exclusive programming services over the televisions in their rooms to sports paraphernalia to trips to Las Vegas.

With these cross-promotional bonanzas in mind, ITT branched into gaming, buying the Desert Inn in 1993 for $160 million and Caesars World Inc. for $1.7 billion two years later. In March 1995, ITT bought Madison Square Garden and the sports teams for about $1 billion in a 50-50 joint venture with Cablevision Systems Corp., a cable operator based on Long Island that owns cable rights to the New York Mets and Islanders. The company paid a premium of $207 million for the WNYC television station in mid-1995 with Dow Jones and repositioned it last week as an outlet for business news and sporting events, carrying local broadcasts of Knicks and Rangers games.

The original plan was to broadcast the news and sports channel in all Sheraton hotel rooms in competition with CNN.

The transformation has yet to bear fruit for shareholders. While the new ITT hit a high of $66.50 last July, it has been trading in the low-$40 range since fall, when the company announced plans to speed up a $1.13-billion expansion plan of two gaming resorts in Las Vegas. Wall Street is concerned by the aggressive expansion in light of the slowdown in the gaming business and several casinos under construction.

Should Hilton spin off the garden, the sports teams and the TV station, analysts estimate they could fetch $1.2 billion or more in a sale.