CNBC's Martha MacCallum on Hilton (HLT) - Promus (PRH) deal
CNBC- Power Lunch Cnbc's Martha Maccallum On Hilton-Promus Deal - September 7, 1999
SUMMARY: MacCallum says Hilton reports the deal will have a negative impact on this year's earnings. MacCallum reports the deal is expected to close by the end of the year.
Bill: Hilton's doing a little expanding. The hotel giant following through on talk it would buy Promus Hotels. It's a $3.1 billion cash and stock deal that gives Hilton the nations fifth-largest hotel company control of the Doubletree, Embassy Suites, and Hampton Inn chains. Right now, shares of the two companies, Hilton's down a fraction with Promus continuing higher, up another 3/38 today at 34 3/4. Joining us now with more on the story is Martha MacCallum.
Martha: Make that 1,700 hotels and 290,000 rooms under one roof. Hilton's that is, the acquisitive Mr. Bollenbach is at it again and this time it's a big one. The much anticipated Promus deal is a done one, and it creates one of the nation's biggest lodging chains. It also gets Hilton into what's known as the limited-service and all-suites business by gobbling up Promus's Embassy Suites and Doubletree names. Although the two sides were admittedly in talks last week, word was that Bollenbach felt the deal was too pricey. Promus pulled in $1.1 billion in revenues last year. Hilton had revenues of $1.8 billion in 1998. Hilton will pay $38.50 cents a share in cash for 55% of Promus shares. The remaining 45% of the deal will be done in stock. Hilton says the deal will reduce earnings by six percent in 1999 and will have an impact on 2000, but that it will save them $55 million in 2001 and $99 million in savings in the next couple of years after that. At least some on Wall Street are wary. Analyst Jonathon Lit at PaineWebber took Hilton to neutral from an attractive this morning on the heels of the announcement. Steven Bollenbach says there will be job cuts on both sides of the deal. He will remain Chief Executive.
I will continue as Chief Executive, Norm as agreed to work with me in a transitional role as we integrate the organizations.
Martha: Also this morning there are reports that Promus Chairman and CEO Norman Blake will not stay on board the combined companies ending a short tenure that began in December of 1998 after the Doubletree and Promus deal. Bollenbach says that the deal will put them in a better position to compete with their main rivals Starwood and Marriott. The deal is expected to close by the end of the year. Shareholders still have to approve this deal. New corporate headquarters will be in Beverly Hills, California. With an office maintained in Memphis, Promus's current home.
Bill: What a change Promus has gone through in the last five years. Casino and gaming and hotels and all that.
Martha: Lots of executive changes.
Bill: Thank you, Martha.
Source: CNBC/Dow Jones Business Video
