Value behind merger

      Call them buzzwords of American business circa 2000: shareholder value. They've been bandied about in the battle for control of ITT Corp.
      In the mind of Stephen Bollenbach, the words are at the core of Hilton's hostile takeover bid.
      Once the Hilton Hotels Corp. chief executive officer issued his company's $10.5 billion unsolicited offer for the parent company of Caesars Palace and the Desert Inn, he began a media offensive that invoked his personal mantra.
      "We will bring added value to ITT's shareholders by virtue of our articulated, focused and achievable growth strategy," he said shortly after the Jan. 27 announcement of the Hilton offer.
      "This is 100 percent in our strategy," Bollenbach added the next day. "This is the strategy we articulated to our shareholders over a year ago."
      The words -- shareholder value -- spark images of an aesthetic quality, as if the concept could be measured by some human emotion. But they're bottom-line terms as familiar to MBAs as cash flow and net revenue.
      "It's about the stock going up, but our objective isn't simply about how much the fund is going to go up today," said Cliff Krauss, a fund manager at Eaton Vance Management, which owned 179,000 ITT shares on Dec. 30. "The question is -- who can develop this and make it go up long term?"
      The New York Stock Exchange has responded favorably to Hilton's offer of $55 a share in cash, stock and assumed debt to acquire the hospitality, gaming, entertainment and information services company. Hilton would purchase $6.5 billion of ITT stock and assume $4 billion of corporate debt.
      Within hours of the announcement, ITT stock had risen to almost $60 a share, where it hovered throughout the remainder of the week.
      A takeover of ITT would give Hilton about 12,000 rooms and 358,000 square feet of casino space in Las Vegas at the Las Vegas and Flamingo Hiltons, Bally's, Caesars Palace and the Desert Inn.
      "These deals are done on the economics," said a source familiar with the evolution of the Hilton bid. "If the stock market had dropped like a rock, (Hilton executives) would've thrown up."
      The company's strategy in its takeover bid is to appeal to the interests of ITT stockholders, said Marc Grossman, Hilton's senior vice president for corporate affairs. The bulk of ITT's 122.7 million outstanding shares is owned by mutual fund companies that invest trillions annually for mom-and-pop investors.
      "Ultimately, this is about the shareholders," Grossman said.
      ITT Chairman Rand Araskog is expected to issue his own appeal to the interests of his stockholders. The company's 11-member board of directors is scheduled to meet Tuesday in New York, and could consider a variety of scenarios to respond to the Hilton offer.
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