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Rand Araskog, the CEO of ITT Corp., is a West Point graduate and a combat-hardened veteran of takeover wars who knows the value of a tactical retreat. He has fought off corporate raiders who sought to break up his company, as well as investors critical of ITT's performance and his high salary. So when Hilton Hotels Corp. offered $6.5 billion to buy ITT, which owns the Sheraton hotel chain and Caesars World casinos, Araskog manned the ramparts again. To raise cash and buttress the company's stock price, he sold once prized but now indefensible properties like ITT's 50% stake in Madison Square Garden. Classic Araskog hardball.

But Hilton hasn't gone away, so Araskog has turned from defense to a scorched-earth policy that is beginning to seem aimed more at saving the CEO's crown than protecting shareholders' interests. Having sold nearly all nonessential holdings--including one of its two corporate jets--and laid off 125 people at its New York City headquarters, ITT is now stripping away promising casinos and profitable hotels, the very heart of the svelte new company that Araskog says he wants to create. Recently ITT sold five Sheraton hotels for $200 million, without competitive bidding, to FelCor Suite Hotels, the largest owner of the Embassy Suite hotels. Then it quietly put the luxe St. Regis hotel, off Manhattan's Fifth Avenue, on the block, even though New York hoteliers stand to rake in profits for years. "ITT management is willing to do anything to keep their jobs," is the blunt assessment of David Wolfe, who follows the lodging industry for the investment firm Oppenheimer & Co. "They are not as concerned about shareholder value as we thought."

Takeover wars are always messy clashes of money and egos in which each side accuses the other of trying to give shareholders the shaft. But the bitter and protracted fight for ITT (1996 sales: $6.6 billion) is a throwback to the corporate wars of the 1980s. "It is very troubling that he didn't put the hotel properties up for bidding," says Mark Sirower, a professor of corporate strategies at N.Y.U.'s Stern School of Business and author of The Synergy Trap: How Companies Lose the Acquisition Game. "He's supposed to maximize the value of these assets."

The battle could be the last hurrah for the spit-and-polish Araskog, 65, a lanky 6-ft. 2-in. Minnesotan of Swedish stock who still towers over the company he has led since 1979. During that time, he has sought to transform himself from a poster boy for overpaid executives to a self-styled champion of shareholder rights. Yet Araskog, who served the National Security Agency as an interrogator of Soviet defectors in the '50s, can't seem to help treating everyone from Hilton CEO Stephen Bollenbach to ITT shareholders as if they might really be agents of a subversive foreign power.

This coolness shows up in a host of ways. Eager for ITT's annual meeting? Keep waiting. Araskog has delayed that crucial showdown from May until the fall to gain time to shore up his defenses. Want to know why he scorns the $55-a-share bid that Bollenbach put on the table in January, which was more than $10 above the stock's price at the time? Forget it. Araskog's not talking--not even to Bollenbach. "ITT has never responded to any of our requests [for a meeting]," says Bollenbach, 54, a veteran hotelier who joined Hilton last year after helping to engineer the Walt Disney Company's $19 billion buyout of Capital Cities/ABC. "They haven't responded to our verbal requests, or to our letters or through second and third parties. They absolutely refuse to talk."

This icy defiance perplexes Wall Street too. "For the life of me, I can't understand why Araskog isn't talking to Hilton," says John Rohs, an analyst for the Schroder Wertheim investment firm. "Even if he went into a meeting without any intention of reaching an agreement, it would at least improve the perceptions that shareholders have." The answer may be that Araskog has spent his entire business career playing defense and is not now about to expose any chinks in his armor. In the '80s he had to fend off three successive attacks by corporate raiders. In his 1989 book The ITT Wars, he declared, "I had to win the battle, or my life and my family's life would be shattered."

There was little time to celebrate victory, however, because ITT was still underperforming, and newly militant big investors such as the California Public Employees' Retirement System (CALPERS) were demanding action. Araskog took up the mantra of shareholder value after CALPERS charged that his lofty $8.5 million compensation in 1990 was out of line with ITT's lackluster performance. To silence such critics and increase shareholder value, Araskog split ITT into three pieces in 1995, spinning off its Hartford insurance company and a clutch of manufacturers, but retaining the ITT corporate name for the Sheraton hotels and Caesars World casino companies. The spinoffs cut the size of his company's sales from $26.5 billion to $6.3 billion.

The plan worked well for the insurance and manufacturing companies, but ITT Corp.'s stock did not follow suit, because Araskog kept on scratching the conglomerateur's itch: in 1994 he paid $500 million for a 50% interest in Madison Square Garden and its major tenants, hockey's New York Rangers and basketball's New York Knicks. The rationale was thin; ITT's market value plunged more than $500 million when the deal was announced. With publishing and education companies remaining in the fold, ITT's mission still looked muddled to Wall Street. While the S&P 500 index surged more than 20% last year, ITT's stock plunged 17%.

That's when Bollenbach pounced. Bollenbach (who is a director of Time Warner, TIME's parent company) joined Hilton in 1996 with big plans to turn the famous but mediocre outfit into a hotel and gaming power. That put ITT, with its nine casinos and more than 425 hotels, squarely in his sights. Although he had engineered a number of high-profile deals, including Disney/Capital Cities, Bollenbach may have made two mistakes. The first was making a lowball bid--$55 a share--that Araskog could ignore. The second was assuming that Araskog would negotiate.

Instead, Araskog clammed up and started selling, and hasn't stopped since: the Garden, a 50% stake in fledgling business/sports channel WBIS, and a minority interest in a French maker of telecommunications gear--one of the last pieces of the company's legacy as a global telecommunications giant. Also on the block are a worldwide chain of Yellow Pages directories, and ITT Educational Services, which includes 59 technical institutes in 26 states.

Now that he has been forced to sell hotels, Araskog is doing so in a way that will damage Hilton should it prevail. In ITT's sale of five Sheratons to FelCor, the company gets back a management agreement to run the properties for 20 years. But a clause in the contract--unusual in the industry--allows for cancellation of the management agreement if ITT is taken over. That could make the properties worthless to Hilton, which is suing ITT over the sale. Hilton would probably mount a similar challenge if ITT sells other core properties, such as the posh Phoenician hotel in Scottsdale, Ariz., and a 70% ownership of Italy's luxurious 30-hotel CIGA chain, without open bidding.

The big question now is, What will Araskog do with the war chest he is raising? He could use part of it to buy back ITT stock, a move that would raise the price above its present $59 level and make a buyout painfully--and perhaps prohibitively--expensive. Or he could offer ITT shareholders a fat dividend as an incentive not to sell.

With each sale, Hilton's chances dim. "If they continue to burn the house down, we may not pursue the merger at all," says Matt Hart, Hilton's chief financial officer. "If the company starts selling all the assets, obviously there is nothing left to buy." Should ITT outlast Hilton, and the odds have now shifted in ITT's favor, Araskog's victory could be pyrrhic in more ways than one. Analysts predict that a Hilton retreat will send ITT shares down below the price Bollenbach offered six months ago. That will leave Araskog facing angry shareholders--and unlike Hilton, they are unlikely to go away empty-handed.