LOS ANGELES -- Hilton Hotels Corp. is buying Promus Hotel Corp. in a $4 billion stock and cash deal that will create one of the nation's biggest lodging chains with more than 1,700 hotels and 290,000 rooms.
The deal, announced Tuesday, gives Hilton a large stake in the fast-growing limited-service and all-suites segments of the travel market. Promus' interests include Embassy Suites, Doubletree, Homewood Suites and Hampton Inn.The companies had said last week that they were holding merger talks. Hilton had shown interest in buying Promus but had indicated it was too expensive. Promus had $1.1 billion in revenues in 1998 with Hilton showing $1.8 billion for the same period.
Under the deal, 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.
Hilton estimates that the merger will result in annual operating and cost savings of roughly $55 million for the first year, with savings estimates of $99 million in following years.
Hilton, however, said that costs associated with the deal will re-duce its earnings in 2000.
The boards of directors for both companies have approved the agreement, and completion of the merger is expected by year-end 1999. Shareholders of both companies still have to approve the transaction.
"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," said Stephen Bollenbach, Hilton president and chief executive officer.
Hilton has about 275 owned, managed or franchised hotels in North America, including its newer mid-priced Hilton Garden Inn hotels and Hilton Residential Suites extended-stay hotels. The lodging company also has Hilton grand vacation timeshare facilities.
The new corporate headquarters will be in Beverly Hills, Calif., where Hilton is located. The new company will maintain an operational presence in Memphis, Tenn., the site of Promus' headquarters.