Itt Acquisition the Stand-Alone Value of Itt

ITT Acquisition The stand-alone value of ITT is $1,878 (6,000+877-999-4,000). The relevancy of the break-even point is that if stock is performing less than the stockholders' full value, they may call for the company to split apart, with proceeds returned to investors in cash, stock in spun off companies, or a combination of both. It is a possible entry point for a prospective buyer. The stand-alone value is subjective and includes expected rates of return where the historical value is objective and includes actual rates of return.

ITT's value to Hilton was: 1) it was cheaper to acquire than to build, 2) acquiring ITT would make Hilton the sixth largest lodging and gaming corporation in the world, being twice as large as any lodging competitor and four times as large as any gaming competitor, and 3) the acquisition tied into Hilton's strategic plan for global expansion. The $55 was a break-even point. It also contained a 29% premium on the existing ITT price per share.

The trivestiture had to be voted on by the board in the annual meeting, so it had not gone through. Most of the ITT board contracts were due to expire, so a new board was up for election. Bollenbach was waiting for the annual meeting to put Hilton people in for election and overturn the trivestiture for the merger to go through and still be an acceptable price for Hilton. 3.

If Hilton's bid fails, the price of the equity would probably drop back to the pretender offer trading value of $44, causing ITT management to work harder in getting the price back up, which is still added value to the stockholders. 4. Based on the pretender offer of $44, the existing level of $60, and the repurchase offer of $70, risk arbitrageurs could earn another $5-$15 dollars more per share.

Risk arbitrageurs would probably be inclined to tender shares at $65 per share, a 49% premium, because of Hilton's insistence to takeover and the value it would add to Hilton. 5. If Hilton.