Hilton in Talks to Merge With Circus Circus
Only a few months after losing a bitter battle to acquire rival ITT Corp., Hilton Hotels Corp. confirmed Friday that it has been talking to Circus Circus Enterprises Inc. about combining the companies’ casino gambling operations.
Hilton officials issued a brief statement that said they are discussing the possibility of splitting gaming and hotel operations into separate publicly traded companies. Las Vegas-based Circus Circus would then merge with Hilton’s former gaming unit in a stock swap, creating the world’s largest operator of casino-hotels.
Representatives of the company said no agreement has been reached and that “many key elements of the potential transaction are not resolved,†according to the statement. “We can’t even guarantee that there will be a transaction,†said Hilton spokesman Marc Grossman.
However, the negotiations signal yet another dramatic change in corporate strategy for Beverly Hills-based Hilton Hotels. Under President and Chief Executive Stephen F. Bollenbach, the company abandoned previous efforts to break Hilton into separate gaming and hotel units.
“It doesn’t make sense to split it up today because there is a huge value in simply being big,†Bollenbach told The Times last year. “We can take our bulk and compete against Marriott, or we can take our bulk [and compete against gambling companies]. It just makes us a more effective competitor.â€
Bollenbach went after ITT last year in part because its hotel and gaming operations--which include Sheraton hotels and Caesars Palace in Las Vegas--would meld nicely into Hilton’s existing businesses. But Hilton lost the takeover battle to Starwood Hotels & Resorts Worldwide Inc., which bought ITT for $10 billion.
Grossman explained the turnaround in corporate thinking by saying, “You always have to look at the alternatives.â€
On the New York Stock Exchange, Circus Circus shares rose 56 cents to $25.75 on Friday, while Hilton jumped $1.81 to $34.81.
Splitting Hilton’s hotel and casino operations could help provide a boost to Hilton stockholders, who have watched their shares languish as the performance of the gambling division has lagged well behind the company’s booming hotel business. Ironically, a few years ago, Hilton was considering dividing because its then-poorly performing hotel operations undermined the huge profits generated by its casino properties.
Gaming and hotel industry analyst Andrew Zarnett said a combination of the Hilton and Circus Circus gambling operations could generate dramatic cost savings. The 1996 merger of Hilton Hotels and casino operator Bally Entertainment Corp. cut operating costs by $70 million, Zarnett estimated.
“Splitting the company makes sense,†Zarnett said. “There is really little synergy between the gaming assets and the lodging assets.â€
Inside the business of entertainment
The Wide Shot brings you news, analysis and insights on everything from streaming wars to production — and what it all means for the future.
You may occasionally receive promotional content from the Los Angeles Times.
