Itt Won’t Swallow Harrah’s Just To Stop Hilton Bid

Some of ITT Corp.’s largest shareholders said the company won’t buy Harrah’s Entertainment Inc. to fend off Hilton Hotel Corp.’s $10.5 billion offer.

Harrah’s would hurt ITT’s performance because Harrah’s earnings are under pressure from increased competition at its riverboat casinos, ITT shareholders said.

“I personally don’t think that ITT wants that exposure to the riverboat market,” said Rob Lyon, a money manager at Institutional Capital Corp., which held 1.8 million ITT shares at the end of September.

Business Week reported in its Feb. 17 issue that an unidentified investment banker said ITT will make itself unattractive to Hilton by buying Harrah’s for $35 a share and assume $800 million of Harrah’s debt.

“That doesn’t sound like a transaction that leads to shareholder value. I don’t put much credence in this,” said Erick Lucera, an analyst at Independence Investment Advisors in Boston, which owned 1.67 million ITT shares Dec. 31.

Harrah’s rose $1.87-1/2 Friday to $20 in trading of 2.67 million shares, more than three times the three-month daily average of 651,190. Earlier, shares rose as high as $20.62-1/2. ITT shares fell 75 cents to $55.62-1/2.

Harrah’s and ITT officials declined to comment.

The report comes as ITT faces a Feb. 14 deadline to respond to Hilton’s offer. Most analysts expect ITT, which also owns 50 percent of Madison Square Garden and the New York Knicks and New York Rangers, to tell shareholders to oppose the offer.

To boost its Caesars World casino operations, ITT could offer to buy a better-performing casino than Harrah’s, such as MGM Grand Inc. or Circus Circus Enterprises Inc. as a way to fend off the Hilton bid, analysts said.

Still, some fund managers said the most likely alternative is for ITT to sell peripheral assets valued at about $2.6 billion and use the proceeds to buy back as much as 30 percent of its stock for up to 65 a share.

Some stocks that traded heavily or moved substantially Friday:

NYSE

Revco DS, up $3.37-1/2 to $41.37-1/2 and CVS, up $3.12-1/2 to $47.12-1/2.

Cleveland-based Revco agreed to be acquired by CVS for about $2.8 billion in stock in a deal that would make CVS the nation’s biggest drug store chain in terms of stores and the second biggest in revenue. Each Revco share is to be exchanged for 0.4692 shares of CVS. CVS, based in Woonsocket, R.I., also would assume about $900 million of Revco debt.

Burlington Coat Factory Warehouse, up $1.12-1/2 to $14.12-1/2.

The Burlington, N.J.-based clothing chain reported a strong profit of $66.05 billion, or $1.64 per share, for its second quarter ended Dec. 28. that compared with $48.78 billion, or $1.20 per share in the similar period a year earlier.

Olympic Financial, down $1.87-1/2 to $9.87-1/2, Mercury Finance, down 37-1/2 cents at $1.87-1/2 and Jayhawk Acceptance (Nasdaq), down $1.75 to $2.25.

Auto lender shares continued to get battered in the aftermath of financial scandal at Mercury. On Thursday, Moody’s Investors Service lowered its debt rating on Minneapolis-based Olympic, while Dallas-based Jayhawk said it plans to file for bankruptcy protection.

Best Buy, down 50 cents to $8.50.

The Minneapolis-based electronics store company said January sales at stores open more than a year fell 15 percent. Best Buy also said Thursday its total sales fell to $522 million, down 7 percent from late January.

NASDAQ

Meridian Data, down $2.37-1/2 to $4.37-1/2.

Hambrecht & Quist cut its rating on Meridian to “hold” from “buy” a day after the Scotts Valley, Calif.-based software maker said it expects disappointing results for the first half of 1997, the Dow Jones News Service reported. Meridian blamed lower gross margins and higher promotional spending.