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ITT CORPORATION
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<PAGE>
[Letterhead of ITT Corporation]
October 31, 1997
Dear Fellow Stockholder:
By now you should have received a proxy statement supplement
from ITT with information on your Board's unanimous decision to
enter into a definitive merger agreement with Starwood Lodging,
the country's largest and best-performing hotel real estate
investment trust (REIT).
The Starwood Transaction Is Compelling--Both Strategically and Financially
Starwood will acquire ITT for $82 per ITT share in cash and
Starwood stock (subject to certain collar provisions), a
substantial premium of $12 per share, or 17%, to Hilton's
inadequate hostile offer. Combining Starwood and ITT will create
the world's largest hotel and gaming company, with 650 hotels in
70 countries, annual revenues of over $10 billion, and strong
growth prospects. The merger will join Starwood's premier Westin
hotel brand with ITT's Sheraton, Ciga, Luxury Collection and Four
Points hotels as well as with our Caesars casinos. We believe the
capital base and human resources at the combined companies should
create significant growth prospects on a global basis.
ITT's Board is working diligently on your behalf to obtain
the best value for your shares. Hilton is continuing its proxy
fight and is still trying to replace your Board with its own
handpicked nominees who would rubber stamp Hilton's lowball $70
per share stock-and-cash offer. We urge you to support ITT's
Board, which expects to complete the Starwood transaction by late
January or early February, by signing and returning the BLUE
proxy card. Ignore Hilton's white proxy card. If you have already
returned Hilton's white card, signing and returning the BLUE card
today will automatically cancel any earlier vote for the Hilton
nominees.
The Starwood Lodging Transaction Provides Both Immediate And Long-Term Value
Through the Starwood transaction, ITT shareholders will
receive $82 in value -- $15 in cash and $67 worth of new Starwood
stock. This transaction is far superior to Hilton's unsolicited
$70 cash-and-stock offer. Starwood also has a "paired share" REIT
structure that we believe should facilitate growth at a rate
surpassing what a combination with Hilton could achieve. We
believe that Hilton, in its attempt to replace ITT's Board of
Directors and effect its inadequate offer, may try to attack this
legal structure in Congress, in Washington, D.C. and in the media
with the exclusive purpose of damaging Starwood's stock price and
reducing the value to be received by ITT shareholders.
When merged with Westin Hotels, which Starwood is also
buying, the new company will be the preeminent hotel and gaming
company. Unlike a Hilton/ITT combination, where Hilton hotels
could compete with Sheraton hotels, Starwood, Westin and ITT
properties are highly complementary.
<PAGE>
Starwood Shares Have Performed Superbly--and Pay Substantial Cash Dividends
Starwood has moved aggressively to build what is expected to
become the world's largest hotel and gaming company. As a result
of skilled and focused management, Starwood has seen its stock
price increase more than fivefold since early 1995 when Barry
Sternlicht and his team assumed control. During this time,
Starwood has significantly outperformed all market indices, other
REITs and Hilton. In addition, Starwood pays a substantial cash
dividend (currently $1.92 per share a year). Upon becoming
Starwood shareholders, ITT shareholders will be entitled to
Starwood dividends. It is your Board's belief that ITT
shareholders will continue to benefit from Starwood's keen focus
on shareholder value and its superior structure and operations.
Starwood And ITT Are An Excellent Strategic Fit
Joining with Starwood Lodging represents an outstanding
growth opportunity and fit for ITT. The combination will create
the leader in hotel and gaming brands, geographic reach and
operational excellence. It will serve all segments of the upscale
global hotel market through The Luxury Collection, Westin and
Sheraton and the mid-price segment through Four Points. It will
own, manage or franchise 430 hotels in North America, 81 in
Europe, 68 in Asia, 35 in Latin America and 36 in the Middle East
and Africa. It will have hotels in virtually every major city in
the world, and also own and/or manage many resorts and casinos.
In addition, many of the over 100 existing Starwood hotels are
expected to become either Sheraton- or Westin-managed properties,
substantially accelerating the expansion of these premium brands.
On the marketing side, we believe there are many significant
advantages to the combination. The combined hotel preference
programs (Westin Premier and Sheraton Club International) will
have over three million members. We believed a shared reservation
system will allow us to fill hotels in a highly efficient manner,
and the companies expect to implement a powerful combined global
marketing effort that can increase brand awareness and help
attract new customers.
Starwood is also firmly committed to getting the most out of
Caesars casinos and believes ITT's gaming properties and
management, combined with Starwood's resources and "paired share"
structure, can continue producing outstanding results for
shareholders.
Starwood has requested that ITT continue to explore ways to
realize the full value of its non-core assets, including ITT
World Directories, our strong overseas telephone directories
business, and ITT Educational Services, our leading
post-secondary technical school business. Starwood has said it
will dispose of non-core assets only in ways that maximize
shareholder value. Accordingly, ITT is continuing to explore the
best way to attain maximum value for these assets.
Vote For The ITT Directors: Get $82 Per Share And Strong Growth Potential
After careful deliberation and a lot of hard and thoughtful
work, your Board is convinced that the Starwood transaction
creates an advantageous growth structure for ITT's assets and
superb value for ITT's shareholders. It is clearly superior to
Hilton's offer, which Mr. Bollenbach has repeatedly suggested he
won't raise. At $82 per share, it is worth almost $1.5 billion
more to ITT shareholders than Hilton's $70 offer -- and $3.3
billion, or $27 per share, more than Hilton's earlier $55 offer.
Of course, your Board would consider any unsolicited alternative
proposals it might receive.
<PAGE>
We are excited about the opportunities the Starwood
transaction will create for ITT's shareholders, employees,
customers and communities. But don't just take our word for it.
Here are some comments from independent third parties about this
dynamic combination.
"The market loves the deal that's been presented by Starwood
Lodging." Stephen Bollenbach, Chief Executive Officer,
Hilton Hotels (The New York Times, 10/22/97)*
"Without question, this deal has enhanced shareholder
value." Bruce Turner, Salomon Brothers (USA Today,
10/21/97)*
"It [Starwood's offer] makes the Hilton bid grossly
inadequate, not only on today's prices but what the combined
Starwood-ITT Company could mean to shareholders going
forward." James Murren, Deutsche Morgan Grenfell
(Knight-Ridder, 10/21/97)*
"Starwood has done a phenomenal job creating shareholder
value." Steven Hash, Lehman Brothers (The Washington Post,
10/21/97)*
"Starwood trades at the multiple it does in large part
because the company has proven not only that it's a very
savvy buyer, but also that it knows how to operate its
properties." Jim Sullivan, Prudential Securities (Barron's,
10/25/97)*
"This will make Starwood a juggernaut . . . They have a very
powerful roster of brands." Marvin Roffman, Roffman-Miller
Associates (Knight-Ridder, 10/21/97)*
As noted in our recent proxy mailing, we expect the Starwood
transaction to be completed in late January or early February. To
proceed with this compelling combination, and to continue to have
the benefit of a Board dedicated to achieving the highest
possible value, you must reelect the ITT Board at the November 12
annual meeting.
To support the Starwood transaction, which will give you $82
per ITT share in cash and Starwood stock, you must sign, date and
return the BLUE card. If you need help voting your shares, please
call our proxy firm, Georgeson & Company Inc., toll-free at (800)
223-2064. Thank you.
Sincerely yours,
/s/ RAND V. ARASKOG
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Rand V. Araskog
Chairman and Chief Executive
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* Permission to include this quotation has not been sought or obtained.
<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:
(800) 223-2064
INTERNET: World Wide Web http://www.georgeson.com
<PAGE>
Attention ITT Shareholders:
VOTE NOW FOR ITT'S DIRECTORS:
Get $82 Per Share And Strong Growth Potential
ITT recently signed a merger agreement with Starwood Lodging, the
largest and best-performing hotel real estate investment trust (REIT).
ITT believes the Starwood transaction is compelling, both
strategically and financially.
Starwood will acquire ITT for $82 per ITT share in cash and Starwood
stock. This is a premium of $12 per share--or 17%--to Hilton's inadequate
hostile offer.
o Combining Starwood and ITT will create the world's
largest hotel and gaming company. It will have over
650 hotels and 14 casinos in 70 countries, annual
revenues of over $10 billion, a strong balance
sheet and exceptional global growth prospects.
o ITT and Starwood are an excellent strategic fit. Starwood's
premier Westin hotels will be combined with ITT's Sheraton,
Ciga, Luxury Collection and Four Points hotels as well as
with ITT's Caesars casinos. Together, we will serve all
segments of the upscale global hotel market and have a major
presence in resorts and gaming.
o For each ITT share, you will receive $82 in value--$15 in
cash and $67 in new Starwood stock. You get the potential
upside of owning shares in a dynamic growth company with the
benefit of owning real estate through a REIT structure.
o Starwood shares have increased more than fivefold since
Barry Sternlicht and his team assumed control in 1995.
Starwood stock has significantly outperformed all market
indices--and Hilton. As one Wall Street analyst puts it,
"Starwood has done a phenomenal job creating shareholder
value." (Lehman Brothers)*
o Because Starwood is a REIT, it pays a substantial cash
dividend (currently $1.92 per share per year). Upon becoming
Starwood shareholders, ITT shareholders will be entitled to
Starwood dividends.
The ITT Board is convinced that the Starwood transaction creates an
advantageous growth structure for ITT assets and superb value for ITT
shareholders. The Starwood transaction is clearly superior to Hilton's
hostile offer, which Hilton has repeatedly suggested it won't raise.
At $82 a share, it is worth almost $1.5 billion more than Hilton's $70
offer and $3.3 billion more than its earlier $55 offer. But to assure
that the ITT-Starwood transaction can become a reality early next
year, we need your vote on November 12 to reelect ITT's directors.
If You Want The Starwood Transaction
Reelect The ITT Directors On the BLUE Card
You must use the BLUE proxy card to reelect ITT's Directors and
receive the benefits of the Starwood transaction. Please sign and
return the BLUE card today. Ignore Hilton's white card. For help
voting your shares, please call our proxy firm, GEORGESON & COMPANY
INC. toll free at (800) 223-2064.
ITT
* Permission to include this quotation has not been sought or obtained.
