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Remember the Greek mythological figure Icarus who flew too close to the sun on wings of wax? The modern-day version is Barry Sternlicht, the highflying CEO of Starwood Lodging Trust, which is in a vicious proxy contest this week with Hilton Hotels for control of ITT Corp. By topping Hilton's offer with a $10.2 billion bid for ITT, Sternlicht has thrust himself into what had been a very personal battle between Hilton CEO Stephen Bollenbach and ITT boss Rand Araskog--and thus into the public spotlight. Sternlicht is a Wall Street darling. His stock, including dividends, has soared...
...ITT FINALLY SLAMS THE DOOR ON HILTON...
Looks like checkout time for Hilton Corp.'s Stephen Bollenbach. After an entertaining nine-month battle, replete with name calling, to buy ITT and its prized Sheraton properties and Caesars hotels and casinos, Bollenbach came up empty. But the escape from Hilton cost ITT its independence. Fearful that ITT shareholders would accept Hilton's $70 a share offer in two weeks, ITT chairman Rand Araskog pulled a rabbit out of a hat by agreeing to sell ITT to Starwood Lodging for $82 a share. That's 17% more than Hilton's "final" offer...
Starwood Lodging, a real estate investment trust (REIT) based in Phoenix, Ariz., was able to outbid Hilton because of a loophole in the tax laws that jacks up a reit's market value. If ITT stockholders approve the deal, the new combination would become the largest lodging company in the world, with 650 hotels in 70 countries and total annual revenues of more than $10 billion. As for Araskog, 65, under the plan he will step down next year and get a seat on Starwood's board plus a consolation prize: a $55 million severance package that was designed...
...over, right? Well...there is an enticing story line that could have the wily Araskog pulling off one last masterly stroke. Once ITT shareholders formally reject Hilton's bid next month, the ITT chairman could cancel the Starwood deal and continue his 18-year reign over the company. No one ever played Monopoly like this...