Exhibit 99.1
Contact: Marc Grossman - Hilton
(212) 872-7175 (9/7 only)
(310) 205-4030
Kathy Shepard - Hilton
(212) 872-7175 (9/7 only)
(310) 205-7676
Gregg Swearingen - Promus
(212) 872-7175 (9/7 only)
(901) 374-5468
HILTON, PROMUS ANNOUNCE MERGER AGREEMENT
-- $4 Billion Transaction To Create One Of
World's Largest, Most Diverse Lodging Companies --
BEVERLY HILLS, Calif., September 7, 1999 -- Hilton Hotels Corporation
(NYSE:HLT), one of the world's premier owners and operators of hotel
properties, and Promus Hotel Corporation (NYSE:PRH), a leader in managing and
franchising highly regarded hotel brands, today announced a definitive merger
agreement in which Hilton will acquire the shares of Promus in a cash-and-stock
transaction.
Per the terms of the merger agreement, Hilton will pay $38.50 per share in
cash for 55 percent of the Promus shares. The remaining 45 percent of Promus
shares will be exchanged for Hilton common stock (collar and exchange ratios
described below). Promus shareholders will have the right to elect to be paid
in cash or Hilton stock, subject to prorations to reflect the 55 percent cash,
45 percent stock ratios. Total consideration of the transaction, including
Promus debt, is approximately $4.0 billion. Upon completion, the merger will
create one of the world's largest and most diverse lodging companies and
combine under one entity the industry's premier brand names.
Hilton/Promus
2-2-2-2
The agreement, announced jointly by Stephen F. Bollenbach, president and
chief executive officer of Hilton Hotels Corporation and Norman P. Blake, Jr.,
chairman, president and chief executive officer of Promus Hotel Corporation,
has been approved by the Boards of Directors of both companies. Completion of
the merger is expected by year-end 1999. Approval of shareholders of both
companies is required. It is anticipated that the transaction will be tax-free
to Promus shareholders with respect to any Hilton stock received in the merger,
but the transaction is not conditioned on such tax-free treatment.
Under terms of the agreement, the stock portion of the transaction has a
+/- 5 percent "collar" centered around the average Hilton stock price for the
30 trading days ended September 3 ($12.60). Accordingly, in the event that the
average Hilton stock price during the measurement period prior to closing is
between $11.97 and $13.23, Promus shareholders who elect stock will receive a
number of Hilton shares equal to $38.50 divided by the average Hilton stock
price during the measurement period. In the event the average Hilton stock
price during a 30-day measurement period immediately prior to closing is less
than $11.97, Promus shareholders electing stock would receive 3.2158 shares of
Hilton for each Promus share. If the average Hilton stock price is greater than
$13.23, the exchange ratio would be fixed at 2.9096 Hilton shares for each
Promus share. Hilton has received a commitment from Bank of America N.A., which
has fully underwritten amounts sufficient to complete the transaction,
including related debt refinancings.
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Hilton/Promus
3-3-3-3
The Hilton-Promus combination will have nearly 1,700 hotels, approximately
290,000 rooms and 85,000 employees, and (based on current analyst estimates and
including anticipated year one synergies) pro forma 2000 EBITDA of
approximately $1.3 billion. Hilton estimated that the merger will result in
annual synergies -- operating efficiencies, cost savings and revenue
enhancement opportunities -- in the $55 million range for the first year, and
$90 million thereafter on a run-rate basis. The transaction will be accounted
for as a purchase. Based on current analyst estimates, the transaction is
expected to be moderately dilutive to Hilton earnings in 2000 due to
incremental depreciation and amortization including goodwill. On a cash flow
basis (less maintenance capital expenditures), the transaction is expected to
be immediately accretive to pro forma cash earnings per share. At year-end
1999, the new company will have approximately $5.4 billion of total pro forma
debt (net of the Park Place Entertainment allocated debt of $625 million).
Aided by the anticipated cost savings, increased revenues from management
and franchise fees, strategic development and expansion of the combined
company's brands and other synergies, Hilton said it expects to achieve annual
average EBITDA growth in excess of 10 percent, and diluted EPS growth in excess
of 20 percent over the next several years. As a result of the merger, the
percentage of Hilton's estimated pro forma 2000 EBITDA generated from
management, franchise and service fees is expected to more than double from
approximately 13 percent as a stand-alone company to approximately 30 percent.
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Hilton/Promus
4-4-4-4
The new company will bring under one umbrella, and feature a complementary
portfolio of, many of the world's best known and most highly regarded hotel
brands, including Hilton, Embassy Suites, Hilton Garden Inn hotels, Hampton
Inn, Doubletree, Homewood Suites and Red Lion. It will feature a significant
presence in virtually every important industry category, from the upscale,
mid-priced and limited-service segments to extended stay and vacation
ownership.
Among the strategic initiatives and benefits envisioned through the
merger:
-- Ability to include the Promus brands in Hilton's award-winning
HHonors frequent guest program, Hilton Reservations Worldwide,
Hilton.com and Hilton Direct.
-- Significant economies of scale in such areas as marketing,
purchasing, operations and technology.
-- Maintenance and growth of Doubletree as a complementary brand to
Hilton.
-- Blending both companies' extended-stay products.
-- Integration of both companies' superior information systems.
-- Concentration of regional operations centers to enhance management of
the expanded portfolio of owned and managed hotels.
Corporate headquarters will be in Beverly Hills, California, with a
significant operational presence being maintained in Memphis, Tennessee.
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Hilton/Promus
5-5-5-5
"This exciting and strategically compelling combination, especially when
placed alongside our alliance with Hilton International, creates a global hotel
ownership, management and franchising powerhouse with the size, geographic
scope, management, respected brands and resources to be a leader in the
hospitality industry for decades to come -- a future that we are convinced will
bring enormous benefits to our respective shareholders, employees, customers,
hotel owners and franchisees," Bollenbach said.
"It is a transaction that immediately accomplishes our longstanding
objectives of acquiring outstanding hotel assets, leveraging our brands and
growing our franchising, management and timeshare businesses. The recognition,
esteem and operating performances of Promus' Embassy Suites, Hampton Inn,
Doubletree, Homewood Suites and Red Lion brands and the leadership position
these brands enjoy in their respective market segments will immediately enhance
and strengthen our existing vibrant and growing stream of management and
franchise revenues."
Mr. Bollenbach continued: "In an industry where size and scale are
important, we are maximizing our ability to achieve operating efficiencies and
moving forward with development and acquisition programs to grow the company
and create value for our shareholders and bring even more services and
destinations and choices to our customers. And in an industry where brand value
cannot be overstated, this combination brings together some of the most
instantly recognizable, complementary and esteemed brand names to be found
anywhere.
"I am particularly pleased to be working on this transaction with Norm
Blake, who has been resolute in his desire to bring value to his shareholders,
hotel owners and employees, and I look forward to coordinating with him and his
team a smooth and effective transition."
Hilton/Promus
6-6-6-6
Mr. Blake said, "Hilton brings certain attributes which allow Promus to be
increasingly more competitive, namely 1) a `flywheel' brand which provides
broad market awareness and consumer equity to complement the Promus brand
portfolio; 2) a well established customer loyalty/frequency program to drive
property level revenues; 3) extensive distribution and global market access to
broaden market reach; 4) timesharing owner/operator expertise to augment
Promus' established market position, and 5) a strong national sales force to
cross-sell brands and drive group business.
"Combining these complementary strengths with Promus' strong brands and
proven franchising and hotel management capabilities created by Promus'
outstanding employees represents a significant benefit to all of our
stakeholders," he said.
The Hilton system currently includes some 275 owned, managed or franchised
hotels in North America with such famous properties as New York's
Waldorf=Astoria, Waikiki's Hilton Hawaiian Village and Chicago's Palmer House,
as well as the new mid-priced Hilton Garden Inn hotels, Hilton Residential
Suites extended-stay hotels and Hilton Grand Vacations timeshare facilities.
Promus Hotel Corporation is the franchisor/operator of the Doubletree
Hotels, Doubletree Guest Suites, Embassy Suites, Hampton Inn, Homewood Suites,
Hampton Inn & Suites, Doubletree Club, Red Lion Hotels, Embassy Vacation Resort
and Hampton Vacation Resort brands. The company also manages non-Promus branded
hotels and facilities in its University Hotel & Conference Center division. The
company franchises, operates or owns hotels throughout the United States and in
Canada, Mexico and Latin America. Promus is headquartered in Memphis, Tennessee
and has approximately 40,000 employees.
Hilton/Promus
7-7-7-7
When added to the hotels owned and/or operated by Hilton Group Plc -- the
U.K.-based company with which Hilton Hotels Corporation has a global strategic
alliance -- the new company's worldwide system will include approximately 1,900
hotels with approximately 350,000 rooms in 50 countries around the world.
Morgan Stanley Dean Witter and Donaldson, Lufkin & Jenrette Securities
Corporation served as investment advisors to Hilton, and Salomon Smith Barney
advised Promus.
This news release contains forward-looking statements with respect to the
financial condition, results of operations and business of Hilton and Promus,
including estimates as to anticipated revenues, EBITDA, cost savings and total
synergies. These forward looking statements are based on plans, estimates and
assumptions and are subject to risks and uncertainties that could cause actual
results to differ materially from those indicated. Among those risks and
uncertainties are the ability of the companies to achieve integration of
operating systems, personnel and facilities as quickly and efficiently as
planned; greater than anticipated costs of integrating the two organizations;
the effect of "change-in-control" clauses in contracts which could lead to
termination or renegotiation as the result of the transactions; and the ability
of the companies to retain key personnel. Other factors that may cause actual
results to differ materially from those contemplated include changes in general
economic conditions and in the hotel and travel industries, adverse changes in
the costs of borrowings, changes in regulatory requirements and actions of
competitors.
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