Will the deals ever stop? Last year was the biggest ever for the merger biz, and Bollenbach’s battle for ITT gets ‘97 off to a prodigious start. It also gets dealmakers’ pulses pounding, since it’s expected to be a long, messy fight that will stop them from fretting about the hefty fees they missed during last year’s glut of friendly, low-fee deals. Hilton’s roll of the dice is motivated by this: High-end hotels are nearly bursting with visitors, but no one wants to invest in more bricks and mortar. And gaming, once a white-hot growth industry, cooled last year as few new states voted to become gambling destinations. (Last week New York said no.) To expand, Hilton has to gobble up competitors, and experts say ITT, which also owns Caesars World casinos, would be a perfect fit. Says gaming analyst Marvin Roffman, “This is a fantasy deal.”
Of course, one man’s fantasy is another’s nightmare. The bad dreams in this case go to ITT chairman Rand Araskog. After nearly two decades in ITT’s top job, Araskog has finally finished unwinding the clumsy conglomerate put together by legendary chairman Harold Geneen in the ’60s and ’70s. Just two years ago ITT did everything from build brakes to write insurance policies, but in 1994 Araskog spun off almost everything but the hotel and casino businesses; the same year he spent more than $1 billion to pick up New York’s Knicks, Rangers and Madison Square Garden. But investors soon tired of the glitzy spinoff strategy, and ITTs sluggish stock price made the company a sitting duck. By last week Araskog was busy huddling with bankers and lawyers to plan a defense. ITT says it will consider Hilton’s overture at a board meeting Tuesday, though analysts expect the offer to be rejected. ITT need not formally respond until late next week.
Araskog’s future isn’t the only one at stake. Sitting in his Beverly Hills office last week, Bollenbach was already making plans to auction off some of Araskog’s beloved new properties. Gone will be the Knicks, the Rangers and the whole Madison Square Garden operation, Bollenbach told NEWSWEEK. “They never should have bought [them],” he says. “They created this opportunity for us by doing things their shareholders didn’t want them to do.” He’s already counting on “at least $100 million” in savings by purging ITT’s executive ranks. He’s also got bad news for Demi, Sly and the rest of the celeb investors in Planet Hollywood: your ITT-financed casino plan is history. “Who would want to pay a gigantic fee to bring in a new brand name when you already have Caesars?” he scoffs, promising to kill the deal.
This is what Bollenbach does best: buying, selling and reshuffling corporate assets. And he’s had quite a run at the table. When Donald Trump’s empire hit the skids in 1991, Bollenbach helped him stay afloat. “Always bet on Steve,” says The Donald. As finance chief at Disney, Bollenbach got credit for helping Magic Kingdom boss Michael Eisner overcome his fear of debt in order to buy Capital Cities/ABC, though the jury’s still out on that deal. Bollenbach admits he wasn’t given the big responsibilities he’d hoped for at Disney–in part because Michael Ovitz arrived to become Eisner’s right-hand man before he, too, famously flamed out. Eisner “spent all his time working on his problem with Mike Ovitz,” complains Bollenbach, who adds, “The disappointment for me at Disney was my personal agreement with Eisner that I was to be part of the strategy-making part of the company.” Bollenbach’s job-hopping–he left Disney after just 10 months–has led to some criticism that, despite his deft hand at financial engineering, he doesn’t know how to build a business over the long term. “It’s just a fact that he’s never run a company before,” says one high-ranking Disney official. The appraisal is seconded by other top Disney-ites, one of whom questions whether “he has the attention span” to mind the store when the excitement of dealmaking wanes.
One thing seems clear: this is one drama that won’t be over any time soon. Araskog and Co. gained experience fighting off corporate raiders in the ’80s. There’s already been talk of white knights, tactical spinoffs and a host of other de- fenses. Standing at Araskog’s side during his final corporate battle is Robert Bowman, a financial whiz kid who was widely expected to succeed Araskog at ITT. For years Bowman and Bollenbach have been considered “the best and brightest” in the world of corporate finance, says editor Julia Homer of CFO magazine, who has tracked both men’s careers. “They’re bold, ambitious risk takers–neither of them has ever lost before in his career,” she says. “I expect a fight to the finish.” Which is exactly the kind of spectacle business fans are rooting for.
