Product Overview

In January 1997, Hilton Hotel Corporation made an unsolicited (i.e., hostile) bid for all shares of ITT Corporation. This case recounts the first seven months of jockeying between Hilton and ITT and gives details on ITT’s “trivestiture” restructuring proposal, which ITT hoped would be a decisive defense against Hilton. The case takes the perspective of Hilton’s chief financial officer and invites students to respond as follows: (1) drop out of the bidding or (2) raise the offering price and, if so, by how much. The analytical tasks in the case are to assess ITT’s value and to set a bid that improves the likelihood of winning the takeover contest without overpaying.

Learning Objectives

(1) To explore the dynamics of takeover attack and defense. The case suggests the game-like nature of hostile-takeover attempts, giving particular attention to takeover-defense strategies and the logic of investors and arbitrageurs. The case is an effective vehicle for broader discussion of defensive strategies that involve restructuring the target. (2) To exercise skills in corporate valuation, drawing especially on market multiples and discounted cash flow (DCF). The case is foremost an opportunity to survey and synthesize insights from various valuation approaches. The instructor could use this case as an opportunity to explore the pros and cons of the approaches and to challenge students to make sense of the information they afford. (3) To consider approaches for setting bidding strategy, emphasizing estimates of intrinsic value and the expected value of not tendering (EVNT). This third objective is an optional extension of case analysis to consider how uncertainties about arbitrageur decisions should affect the bidder’s strategy.