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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.
--Reported by Bernard Baumohl/New York