NEW YORK — Hilton Hotels Corp. and Ladbroke Group are in talks that could produce a merger of much of their hotel operations, Hilton Chief Executive Stephen Bollenbach said Thursday.
An alliance between two of the world's largest hotel operators could be as broad as "a jointly owned company that has important pieces of the two separate hotel companies in it," Bollenbach said in an interview.
The discussions between Hilton Hotels and Ladbroke's Hilton International, which the London-based company acquired in 1987, reflect warmer relations. After expanding into each other's territory in the 1980s, Hilton International sued Hilton Hotels in 1991 over its international push.
Bollenbach, who joined Hilton Hotels from Walt Disney Co. last month, has met twice with Ladbroke Chief Executive Peter George to discuss possible common interests. George acknowledged the talks, saying, "We continue to discuss a broad range of issues with Hilton Hotels Corp."
Beverly Hills-based Hilton Hotels owns the Waldorf-Astoria in New York, the Palmer House in Chicago and 13% of the Waikoloa Village in Hawaii.
Combining the hotel businesses could boost profit by cutting costs. A joint venture could also help both Hiltons market their 390 owned and franchised hotels around the world.
"Hilton Hotels Corp. is a natural bedfellow for Ladbroke," said Greg Feehely, an analyst at Kleinwort Benson Securities in London. "A successful reunification would create the largest hotel and gaming company in the world."
Hilton and Ladbroke are discussing a range of possible ventures, Bollenbach said. The narrowest alliance would include combining tasks such as advertising and sales. At best, they would group much of their hotel business in a new company.
An outright merger of the operations seems less likely, Bollenbach said. Ladbroke's off-track betting unit, the largest in the world, would not mesh with Hilton's casinos, such as the Flamingo in Las Vegas, Bollenbach said.
However, some London analysts said combining the companies outright would make a perfect marriage. In January, Hilton Hotels scrapped plans to spin off its gaming operations.
The two companies probably would not combine all their hotel businesses, Bollenbach said. Hilton Hotels doesn't want to share control, revenue and potential sale proceeds of its trophy properties.
Company founder Conrad Hilton spun off his international properties to shareholders in 1964 and sold his remaining shares to Trans World Airlines in 1967. Under that agreement, Hilton Hotels gave up its rights to the Hilton brand outside the United States.
That didn't stop the two from competing. Hilton Hotels went overseas again in the '80s under the Conrad International name, and Hilton International invaded the U.S. with Vista hotels. Hilton International sought $100 million from Hilton Hotels in a 1991 lawsuit, alleging that the Conrad hotels were creating the impression they were Hiltons. A U.S. federal judge ruled in August that Hilton Hotels could keep using the Conrad name.
Talks between the two companies intensified when George took over Ladbroke at the start of 1994, and they accelerated after Bollenbach joined Hilton.