Hilton, Grand disclose merger details

Hilton Hotels Corp. and Grand Casinos Inc. on Wednesday released previously confidential proxy statement covering the split of Hilton into separate gaming and lodging companies and the subsequent merger of the gaming entity with Grand's wholly owned casinos.

The split and merger, which include a swap of newly issued stock, are expected to be completed by year's end if Hilton and Grand shareholders approve.

The declining prices of both companies' stocks have prompted discontent among some shareholders, though insiders holding major stakes in Hilton and Grand are in favor of the deals.

Hilton said it has asked for an IRS ruling that the distribution of shares in the gaming spinoff, Park Place Entertainment Corp., to Grand shareholders will be tax-free to Hilton holders.

Grand will also separate its wholly owned Mississippi casinos from the Indian casino-management business in a tax-free transaction to its shareholders. The Indian casino management business and other assets, including a vacant 10-acre parcel in Las Vegas, will be spun off as a new public company.

Grand has also asked the IRS to rule that the spinoff won't be taxable to Grand shareholders.

Under the deal, Grand shareholders would receive a little less than one share of stock in Park Place for each Grand share, as well as one share of the new Grand spinoff. Grand holders would wind up with about 13.6 percent of Park Place.

The proxy, which will be mailed to shareholders of both companies later this month, also disclosed that:

+. Park Place Entertainment will trade on the New York Stock Exchange under the proposed ticker symbol PPE.

+. Hilton President and Chief Executive Officer Steve Bollenbach will become chairman of Park Place and retain his Hilton posts.

Park Place will pay Bollenbach a $620,000-per-year salary and a discretionary bonus that, if awarded, will not exceed $380,000 a year, for a potential cash compensation total of $1 million maximum.

He will also receive options to acquire four million shares of the hotel company. The strike price for the options, vesting at 25 percent a year, will the price Hilton lodging company stock trades at on the day the split becomes effective.

Bollenbach will also receive hotel company "performance options" to acquire another two million shares if the average price of the hotel stock during any seven consecutive trading days exceeds 200 percent of the stock price at the split within five years.

+. Arthur Goldberg, currently president of Hilton's gaming division, will become Park Place's president and chief executive officer.

Goldberg gets a base salary of $2 million a year, $1 million of which is deferred, plus a deferred $1 million bonus. His stock-option package is similar to Bollenbach's, except that it's tied to the trading price of Park Place on the day the split becomes effective.

The compensation packages, which are comparable to those of other large-cap gaming companies, are heavily weighted toward options that won't have any value unless the stocks of the separate companies perform well.

+. Wallace Barr, currently executive vice president executive for Hilton's gaming operations, will become Park Place's executive vice president.

+. Clive Cummis will become the gaming company's executive vice president of law and corporate affairs, and secretary. He is currently chairman of the law firm Sills, Cummis, Zuckerman, Radin, Epstein & Gross.

+. Mark Dodson, currently executive vice president and treasurer for Hilton Gaming, will become a Park Place executive vice president.

+. Hilton Senior Vice President and Treasurer Scott LaPorta will become Park Place executive vice president and chief financial officer.

+. Grand Casinos Chairman Lyle Berman will serve as a Park Place director.

+. Grand's president, Tom Brosig, will be in charge of Park Place's Mississippi, Louisiana and Missouri operations.

Hilton said Matt Hart, its executive vice president and chief financial officer, will add the duties of treasurer for the lodging company.

Hilton, which owns, manages or franchises about 260 hotels in the United States, will continue to pursue a growth strategy centered on acquiring full-service hotels in markets seeing little new supply, the company said. So far this year, Hilton has bought about $860 million of hotel properties.

Park Place Entertainment will own 18 gaming properties with more than 23,000 hotel rooms in Nevada, Atlantic City, Mississippi, Louisiana, Missouri, Australia, Uruguay and other Nevada markets.

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