Allegis to Sell Hilton Unit to British Firm for $1.07 Billion

NEW YORK — Allegis Corp. on Friday signaled the start of its self-imposed breakup by announcing the sale of its Hilton International hotel unit--which it purchased barely five months ago--to a British hotel and bookmaking firm for $1.07 billion.

The buyer is Ladbroke Group, owner and operator of 62 small and medium-sized hotels, mostly located in the United Kingdom.

With its purchase of Hilton International, Ladbroke will acquire a network of 91 hotels throughout the world. Of those, Hilton International owns 10 and manages 81 others, some of which it partly owns or leases.

The sale is the first so far under Allegis’ program to sell off most of its major subsidiaries and disburse the proceeds to shareholders, a plan that was undertaken in part as an anti-takeover maneuver. Also on the block are Allegis’ Westin hotels, Hertz Rent-a-Car and part of its Apollo computerized reservations system.

The pilots union of Allegis’ United Airlines subsidiary is also mounting an effort to acquire a substantial interest in the airline itself.

Securities analysts familiar with Allegis said they consider the Hilton sale price a fair one, particularly as it represents a gain of nearly $88 million over what Allegis paid for the company.

“Allegis was criticized for paying too much for Hilton,” remarked Helane Becker, airline analyst for the Shearson Lehman Bros. investment firm. “I think it’s now obvious that they did not, since they got more for it now.”

Allegis stock closed at $97.375 a share in trading Friday on the New York Stock Exchange, down 50 cents.

For Hilton International, which was spun off from Hilton Hotels Corp. as an independent public company in 1964, the latest purchase may end a period of itinerancy.

Hilton International was acquired in 1967 by Trans World Airlines (later Transworld Corp.), and sold to Allegis for $982.5 million on March 31 this year. Within 10 weeks of the day the deal closed, Allegis Chairman Richard J. Ferris was ousted as the Chicago-based corporation’s board repudiated his plan to align Hilton, Westin, Hertz, and United into a travel-services conglomerate.

The company’s program to sell off the non-airline pieces followed.

Wall Street professionals expect Allegis to distribute between $55 and $75 a share to shareholders once it completes the sale of Westin and Hertz. The $1.07 billion to be paid for Hilton, if fully distributed, would come to just over $18 a share.

Analysts said they expect the next divestitures to be somewhat more difficult. Westin, in particular, does not lend itself to sale as a unit, since it comprises scores of properties of widely varying quality and attractiveness.

Executives of Ladbroke and Hilton International expressed hope Friday that the latest sale would end the peregrinations of the hotel chain.

“When you’ve had two different owners in six months, it’s not a very easy situation,” Helmut Hoermann, president and chief operating officer of Hilton International, said in an interview.

Hilton last year earned $25.9 million on revenue of $754.5 million, compared to profit of $32.8 million the previous year on revenue of $694.2 million. Analysts said profit margins declined in 1986, partly because many Americans, worried about terrorism, canceled plans to travel to Europe. Americans make up more than 26% of the chain’s clientele.

Under the deal, Ladbroke will acquire all of Allegis’ interest in the ownership and operation of Hilton International hotels. These include several Vista International hotels within the continental United States, where Hilton International is not permitted to use the Hilton name.

Ladbroke owns more than 1,000 retail betting shops in Britain, where it is the leading firm of bookmakers. It has also developed a large real estate business in Britain and the United States.