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ITT CORPORATION
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<PAGE>
[Letterhead of ITT Corporation]
October 22, 1997
Dear Fellow Stockholders:
On Monday, your company and Starwood Lodging announced the
signing of a definitive merger agreement providing for Starwood
Lodging to acquire ITT for $82 per ITT share. Under the
agreement, ITT stockholders will receive $15 in cash and $67 in
newly issued shares in Starwood Lodging, subject to certain
collar provisions. This transaction is expected to close in the
first quarter of 1998.
Your Board of Directors has unanimously approved this
exciting merger which will create the world's largest and most
powerful hotel and gaming company, with 650 hotels in 70
countries. The merger will combine Starwood's premier Westin
brand with our Sheraton, Ciga, Luxury Collection and Four Points
hotels. The Starwood transaction is the right structure for our
assets, the right transaction for our stockholders, and the right
opportunity for our employees. To date, in 1997 Starwood Lodging
has declared dividends of $1.26 per share and as a result of this
merger you can expect to see your dividend in 1998. The complete
text of the press release describing the merger is enclosed with
this letter.
Your Board of Directors has worked diligently to negotiate a
transaction which the Board believes creates vastly superior
value to Hilton's low ball offer of $70 per ITT share in cash and
Hilton stock. Your Board will continue to put the interests of
stockholders first.
We believe the best way to obtain the highest value from
your investment is to reelect the ITT Board of Directors who are
committed to your best interests. Reject Hilton's hand picked
nominees who support Hilton's inadequate $70 per share offer for
your shares and who are not expected actively to solicit
additional offers! Return ITT's blue proxy card; do not return
Hilton's white card.
WE URGE YOU TO REELECT ITT'S BOARD OF DIRECTORS WHO ARE
COMMITTED TO MAXIMIZING THE VALUE OF YOUR INVESTMENT.
VOTE THE BLUE PROXY CARD TODAY!
Sincerely,
/s/ Rand V. Araskog
Rand V. Araskog
Chairman and Chief Executive
<PAGE>
FOR IMMEDIATE RELEASE
Contacts:
Starwood Lodging ITT Corporation
Media: Media:
Michael Claes 212-614-5236 Jim Gallagher 212-258-1261
or 212-258-1281 George Sard/David Reno 212-687-8080
Analysts: Analysts:
Stuart Carlisle 212-614-528 Anne Tarbell 212-258-1622
STARWOOD LODGING TO ACQUIRE ITT FOR $82 PER SHARE
$13.3 BILLION TRANSACTION WILL CREATE
WORLD'S LARGEST HOTEL COMPANY
Starwood Lodging Expects 20% Accretion To Pro Forma FFO
Phoenix, AZ and New York, October 20, 1997 -- Starwood
Lodging (NYSE: HOT) and ITT Corporation (NYSE: ITT) announced
today that they have signed a definitive merger agreement
providing for Starwood Lodging to acquire ITT for $15.00 in cash
and $67.00 in newly issued paired shares in Starwood Lodging for
a total value to ITT shareholders of $82.00 per share.
The combination of Starwood Lodging and ITT will create the
preeminent global hotel company, with some 650 hotels in 70
countries, with combined revenues over $10 billion. It will
control six powerful international brands: Sheraton, Westin,
CIGA, Four Points, The Luxury Collection and Caesars. Including
its pending acquisition of Westin Hotels, Starwood Lodging will
become the largest hotel company and the largest real estate
investment trust in the world, with a total market capitalization
of approximately $20 billion. Starwood Lodging's strategy will
focus on expanding its global hotel and gaming businesses and
continuing to evaluate the divestiture of non-core assets.
Starwood Lodging will also assume $3.5 billion in
outstanding ITT debt, for a total transaction value of
approximately $13.3 billion.
The transaction will be accounted for as a purchase, and is
expected to be approximately 20 percent accretive to Starwood
Lodging's pro forma Funds From Operations (FFO) during the first
12 months of combined operations. Contributing to this accretion
will be an estimated $100 million in synergies from greater
workforce economics including those recently announced by ITT;
shared technology, reservation, and purchasing services;
cross-marketing activities; a combined hotel preference program
(Westin Premier and Sheraton Club International) and other
efficiencies arising from the merger.
The taxable transaction is anticipated to close in the first
quarter of 1998, subject to shareholder, gaming, and antitrust
approvals. Under the merger agreement,
<PAGE>
Starwood Lodging may receive a termination fee and reimbursement
of expenses under certain circumstances.
Shares of Starwood Lodging Trust, which is the nation's
largest hotel real estate investment trust, are paired with and
trade together with shares of Starwood Lodging Corporation, a
premier hotel operating company.
Barry S. Sternlicht, who will continue as Chairman and CEO
of the combined companies, said, "The lodging industry has become
a global business that benefits from scale and product
distribution. This transaction gives the combined companies a
sound balance sheet, which will enable us to continue to be a
growth company and to take advantage of our current acquisition
pipeline and a rapidly consolidating industry."
"This acquisition complements our current holdings in every
part of the world by strengthening our presence in key markets,
including Europe, Latin America and Africa. The combination of
Starwood, Westin and Sheraton will create the number one upscale
hotel company in the world, and will dramatically strengthen our
overall growth platform. We will have the financial clout,
operating infrastructure, proprietary pipeline and management
capabilities to pursue acquisitions globally," he said.
"Rand Araskog has spent 31 years at ITT and 18 years as
Chairman and CEO. He has built one of the greatest collections of
brands, assets and people. We intend to retain a significant
number of ITT senior executives, and look forward to working with
them in the transition to build off the world-class platform they
have created," said Sternlicht.
Mr. Araskog said, "This is a superb transaction for ITT
shareholders, combining the benefits of Starwood's paired share
REIT structure, the extraordinary fit between Sheraton and
Westin, Starwood Lodging's substantial quarterly cash dividends,
and enormous growth potential under Starwood's leadership. This
is the right structure for our assets, the right transaction for
our shareholders, and the right opportunity for our employees.
ITT's directors have worked diligently to see to it that our
stockholders get the best possible deal."
"We look forward to working closely with Barry Sternlicht
and the proven Starwood management team, which has created more
shareholder value over the past three years than any other REIT,
to ensure the future success and growth of this new enterprise,"
he added.
ITT will have minority representation on the Starwood
Lodging boards. ITT will designate four directors, one of whom
will be Mr. Araskog.
The offer includes a collar of $4.00 per share around
$57.263, the five-day trailing average price of Starwood Lodging
stock. The exchange ratio will be fixed at 1.094 Starwood Lodging
shares per ITT share if Starwood Lodging's share price exceeds
$61.263 per share, and 1.258 Starwood Lodging shares per ITT
share if Starwood Lodging's shares trade below $53.263, based on
Starwood Lodging's average share price during a 20-day period
prior to the date of the ITT stockholders meeting.
<PAGE>
Starwood Lodging has received "highly confident" letters
from BT Alex. Brown Incorporated and Bear Stearns & Co., Inc. to
finance the transaction.
ITT Corporation consists of Sheraton, a premier hotel
company which owns, manages and franchises 424 hotels in 62
countries; Caesars, the leading brand name in the gaming
industry; and ITT World Directories. ITT also has ownership
positions in ITT Educational Services (83.3%) and Madison Square
Garden (10.2%). ITT has a definitive agreement to sell its 50%
interest in New York City television station WBIS+ to Paxson
Communications Corp. (ASE: PXN).
Starwood Lodging Trust is the largest hotel REIT in the
United States, which, including the pending acquisition of Westin
Hotels, owns or manages 162 hotels with over 60,000 rooms in 24
countries. Starwood Lodging Trust conducts all of its business as
general partner of SLT Realty Limited Partnership. Starwood
Lodging Corporation, which conducts substantially all of its
business as managing general partner of SLC Operating Limited
Partnership, leases properties from the Trust and operates them
directly or through third-party management companies.
# # #
Statements in this press release that are not strictly
historical are "forward-looking" statements under the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Although Starwood Lodging believes the expectations
reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that its
expectations will be attained. Forward-looking statements involve
known and unknown risks which may cause Starwood Lodging's actual
results to differ materially from expected results. Factors that
could cause results to differ materially from Starwood Lodging's
expectations include, without limitation, completion of the
acquisition described in this press release and future
acquisitions, the availability of capital for acquisitions and
for renovations, the ability to maintain existing franchise,
management and representation agreements and to obtain new ones
on current terms. Competition within the lodging industry, the
cyclicality of the real estate business and the hotel business,
real estate and economic conditions and other risks detailed from
time to time in Starwood Lodging's SEC reports including
quarterly reports on form 10Q, reports on 8K and annual reports
on form 10K.
<PAGE>
ATTENTION ITT SHAREHOLDERS:
DO YOU WANT DIRECTORS WHO WILL
RUBBER STAMP HILTON'S LOWBALL
BID FOR ITT--OR, EVEN WORSE,
RUN YOUR COMPANY?
Hilton is asking you to replace ITT's Board of Directors with its
own handpicked nominees who would rubber stamp Hilton's
inadequate $70 per share hostile offer for your company. But do
you really know who these people are? Will they work for your
best interests--or only do what's best for Hilton? Hilton's own
proxy statement admits that "it's not expected that the Hilton
nominees would actively solicit additional offers" for ITT.
Before deciding whether to vote for Hilton's "rubber stamp"
Board, take a moment to look at who Hilton is proposing as the
new directors of your company.
Hilton's Nominees
According to Hilton's own proxy, their nominees include:
o Three people who served in senior executive capacities at
companies that have filed for bankruptcy since 1990.
o Four former directors of Bally Entertainment who were paid
$200,000 by Hilton after Hilton bought Bally last year.
o The brother-in-law of Hilton's Chief Financial Officer.
o An executive of DiGiorgio Corporation, the food distributor
owned by Hilton's head gaming officer.
o Two former colleagues of Hilton's Chief Executive Officer.
o Two former executives at Hilton's investment banking firm.
o A partner at one of Hilton's law firms.
o Eight people with no current job.
Would you be comfortable with these people as directors of
ITT--especially when nobody knows how long they will control the
fate of your company? Remember, it took Hilton 6 months to get
gaming approvals to complete its friendly acquisition of Bally
last year.
If you vote for the ITT Board, you will get directors committed
to creating economic value superior to Hilton's inadequate
hostile offer. The ITT Board has already overseen the creation of
more than $15 billion in market value since the beginning of
1992, and stockholders in ITT over that time have seen their
investment outperform the S&P 500 by more than 70%. What will
Hilton's nominees do for you?
Choose Directors Who Are Committed To You
Vote For The ITT Directors On The BLUE Card
You must use the BLUE proxy card to reelect ITT's experienced
Directors. Please sign and return your BLUE card today. Ignore
Hilton's white card. If you have questions, or need information
or voting assistance, please call our proxy firm, GEORGESON &
COMPANY INC. toll-free at (800) 223-2064.
ITT
<PAGE>
If your ITT shares are held
in the name of a bank or brokerage firm,
only that firm can execute a proxy on your behalf.
Please contact the person responsible for your account and give
instructions for the BLUE PROXY CARD to be voted
with your Board's recommendation.
If you have any questions or need assistance in voting your
shares, please contact our proxy solicitor:
GEORGESON
& COMPANY INC.
Bank and Brokers Call Collect:
(212) 440-9800
or
ALL OTHERS CALL TOLL-FREE:
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