(2 of 3)
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.