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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(Amendment No. 42)
SOLICITATION/RECOMMENDATION STATEMENT
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
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ITT CORPORATION
(Name of Subject Company)
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ITT CORPORATION
(Name of Person(s) Filing Statement)
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Common Stock, no par value
(including the associated Series A Participating Cumulative
Preferred Stock Purchase Rights)
(Title of Class of Securities)
450912 10 0
(CUSIP Number of Class of Securities)
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RICHARD S. WARD, Esq.
Executive Vice President,
General Counsel and Corporate Secretary
ITT Corporation
1330 Avenue of the Americas
New York, NY 10019-5490
(212) 258-1000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
With a copy to:
PHILIP A. GELSTON, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
(212) 474-1000
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INTRODUCTION
The Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") originally filed on February 12, 1997, by ITT
Corporation, a Nevada corporation (the "Company"), relates to an offer by
HLT Corporation, a Delaware corporation ("HLT") and a wholly owned
subsidiary of Hilton Hotels Corporation, a Delaware corporation ("Hilton"),
to purchase 61,145,475 shares of the common stock, no par value (including
the associated Series A Participating Cumulative Preferred Stock Purchase
Rights), of the Company. All capitalized terms used herein without
definition have the respective meanings set forth in the Schedule 14D-9.
Item 4. The Solicitation or Recommendation.
The response to Item 4 is hereby amended by adding the following
after the final paragraph of Item 4:
(a) Recommendation of the Board of Directors.
At a meeting of the Board held on October 19, 1997, the Board of
Directors of the Company unanimously reaffirmed its conclusion that the
Hilton Transaction, including the Hilton Tender Offer, is inadequate and
not in the best interests of the Company. Accordingly, the Board continues
to unanimously recommend that the stockholders of the Company reject the
Hilton Transaction and not tender their Shares pursuant to the Hilton
Tender Offer or take any other action to facilitate the Hilton Tender
Offer.
As further described in Item 7, at its October 19 meeting, the
Board approved a merger (the "Merger") of the Company and an entity jointly
owned by Starwood Lodging Corporation ("Starwood") and Starwood Lodging
Trust ("Starwood Trust"). The terms of the Merger are set forth in an
Agreement and Plan of Merger (the "Merger Agreement") dated as of October
19, 1997, among the Company, Starwood, Chess Acquisition Corp. and Starwood
Trust. In the Merger, each share of Common Stock of the Company will be
converted into the right to receive Paired Shares (as defined below),
subject to certain collar provisions and $15 in cash. The shares of common
stock, par value $0.01 per share, of Starwood and the trust shares, par
value $0.01 per share, of Starwood Trust trade as "paired shares" (the
"Paired Shares") on the New York
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Stock Exchange. As a result of the Merger, the Company will be wholly owned
by Starwood and Starwood Trust.
(b) Reasons for Recommendation. In reaffirming its recommendation
that stockholders of the Company should reject the Hilton Transaction, the
Board considered a number of factors, including, without limitation, (i)
the factors previously disclosed in Amendment No. 29 to the Schedule 14D-9
and (ii) the Board's belief that the Merger will produce greater value for
the stockholders of the Company and greater benefits for the Company's
employees, suppliers, creditors, customers, and the economies and
communities in which the Company operates than the Hilton Transaction,
including the Hilton Tender Offer, and the Comprehensive Plan.
Item 7. Certain Negotiations and Transactions by the
Subject Company
The response to Item 7 is hereby amended by adding the following
after the final paragraph of Item 7:
At a meeting of the Board held on October 19, 1997, the Board
approved the Merger and the terms of the Merger Agreement. The Board's
decision to enter into the Merger Agreement was based on the Board's review
and consideration of the interests of the Company's stockholders and all
other factors permitted by applicable law, including the interests of the
Company's employees, suppliers, creditors and customers; the economy of
Nevada and the nation; the interests of the communities in which the
Company operates and of society; and the long and short-term interests of
the Company and its stockholders.
The Board also considered a presentation by, and the
advice and views of Goldman, Sachs & Co. ("Goldman Sachs") and
Lazard Freres & Co. LLC ("Lazard Freres"), financial advisors to
the Company, concerning the Company, Starwood, Starwood Trust and
the financial aspects of the Merger, and the opinion of Lazard
Freres to the effect that, as of October 19, 1997, and subject to
the qualifications and limitations set forth in such opinion, the
consideration to be received by stockholders of the Company
pursuant to the Merger is fair from a financial point of view.[1]
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1 Goldman Sachs advised the Board that it believed it to be
inappropriate for Goldman Sachs to deliver an opinion with respect to the
Merger in light of Goldman Sachs' involvement and financial interest in the
pending sale of Westin Hotels and Resorts ("Westin") to Starwood and
Starwood Trust (the "Westin Transaction"). Goldman Sachs, through certain
of its affiliates, has a significant equity interest in Westin. Following
the consummation of the Westin Transaction, which is expected to close in
January 1998, certain affiliates of Goldman Sachs will have an equity
interest in Starwood and will have one representative on the board of
directors of each of Starwood and Starwood Trust. In addition, Goldman
Sachs is serving as financial advisor to Westin in the Westin Transaction
and will receive advisory fees in connection therewith and may participate
in arranging certain financing for Starwood in connection with the Westin
Transaction.
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In addition, the Board considered the terms and conditions of the
Merger Agreement and that the Merger Agreement permits the Company, to the
extent required by the fiduciary duty of the Board, as determined in good
faith by a majority of the disinterested directors based on the advice of
counsel, in response to unsolicited requests, to participate in discussions
or negotiations with or furnish information, subject to an appropriate
confidentiality agreement, to any person. To the extent required by its
fiduciary obligations, as determined in good faith by a majority of the
disinterested directors based on the advice of counsel, the Board may
withdraw its recommendation of the Merger, terminate the Merger Agreement
and approve or recommend an alternative change-of-control transaction for
the Company that the Board in its good faith (based on the opinion of
independent financial advisors that the alternative transaction provides
consideration in excess of the consideration provided for in the Merger) is
more favorable to the Company and its stockholders, and provided that such
alternative transaction, to the extent it requires financing, is fully
financed or, in the opinion of the Board (based on the opinion of
independent financial advisors) is reasonably capable of being financed.
Upon such termination of the Merger Agreement (or termination for several
other reasons), the Company must pay to Starwood a $195 million fee (which
increases to $225 million after November 21, 1997) and reimburse Starwood
for its expenses related to litigation and financing and up to $25 million
of its other expenses. The Board believes that the provisions of the Merger
Agreement should not deter a more attractive offer for the Company if any
party is prepared to initiate one.
Having considered all of the foregoing, the Board concluded that the
Merger is fair to and in the best interests of the Company, its
stockholders and other corporate stakeholders.
In light of the Merger, the Board has determined not to pursue the
Comprehensive Plan and expects that it
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Starwood Trust (the "Westin Transaction"). Goldman Sachs, through certain
of its affiliates, has a significant equity interest in Westin. Following
the consummation of the Westin Transaction, which is expected to close in
January 1998, certain affiliates of Goldman Sachs will have an equity
interest in Starwood and will have one representative on the board of
directors of each of Starwood and Starwood Trust. In addition, Goldman
Sachs is serving as financial advisor to Westin in the Westin Transaction
and will receive advisory fees in connection therewith and may participate
in arranging certain financing for Starwood in connection with the Westin
Transaction.
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will terminate the Tender Offers without acquiring any securities pursuant
thereto.
The Merger Agreement contains customary representations and
warranties, covenants and closing conditions. The Merger is subject to a
number of conditions, including the approval of the stockholders of the
Company, Starwood and Starwood Trust.
A copy of a press release announcing the Merger is filed as Exhibit
117 hereto and is incorporated herein by reference.
* * *
Pursuant to the Merger Agreement, the Company may take steps to
monetize or otherwise realize the value of certain assets. These
alternatives could lead to and involve undertaking negotiations which may
result in a purchase, sale or transfer of a material amount of assets by
the Company or one or more subsidiaries of the Company. The Merger
Agreement provides that any agreements in respect of asset dispositions may
provide that any such disposition shall not be consummated until after the
effective time of the Merger and that such agreements are terminable by the
Company if the Merger Agreement is terminated for any reason. At the date
hereof, there have been contacts with parties who have expressed interest
in the possibility of pursuing various types of transactions with the
Company and, in some cases, negotiations regarding potential transactions
have commenced.
The Board has determined that disclosure of the substance of
negotiations concerning, or the possible terms of, or potential parties to,
any transactions or proposals of the type referred to above in this Item 7
prior to an agreement in principle with respect thereto would jeopardize
the initiation or continuation of negotiations with respect to such
transactions and, as previously disclosed, has adopted a resolution
directing that no such disclosure with respect to any such transaction be
made until such agreement in principle has been reached.
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Item 9. Exhibits.
The response to Item 9 is hereby amended by adding the following
new exhibit:
117. Text of Press Release issued by the Company and
Starwood dated October 20, 1997.
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SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
Statement is true, complete and correct.
ITT CORPORATION
By /s/ RICHARD S. WARD
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Name: Richard S. Ward
Title: Executive Vice President,
General Counsel and
Corporate Secretary
Dated as of October 20, 1997
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EXHIBIT INDEX
Exhibit Description Page No.
(117) Text of Press Release issued by the Company
and Starwood dated October 20, 1997....
[Exhibit 117]
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 212-614-5287 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.
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2
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 economies 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, 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.
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3
"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.
Starwood Lodging has received "highly confident" letters from BT
Alex.Brown Incorporated and Bear Stearns & Co., Inc. to finance the
transaction.
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4
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.
