Hilton Hotels Corporation Agrees to Acquire Lodging Business of

Hilton Group plc; Transaction to Make Hilton Hotels Corp. a Global Company for 
the First Time in 40 Years 
BEVERLY HILLS, Calif.--(BUSINESS WIRE)--Dec. 29, 2005
Hilton Hotels Corporation (NYSE:HLT) ("HHC") today
announced an agreement whereby HHC will acquire the lodging assets of
Hilton Group plc (known collectively as "Hilton International" or
"HI") for approximately GBP 3.30 billion (or $5.71 billion) in an
all-cash transaction. This equates to a purchase price multiple of
11.3 times pro forma 2006 Adjusted EBITDA. The purchase price assumes
a USD/GBP exchange rate of $1.73:GBP 1; the USD amount may change
depending on the exchange rate at closing. 
The transaction is expected to close in the first quarter of 2006.
Consummation of the transaction is subject to a number of conditions,
including receipt of certain competition and governmental clearances,
and the approval of Hilton Group shareholders. 
Hilton Group will retain its gambling and betting business and is
expected to be renamed Ladbrokes plc. 
Upon completion of the transaction, Hilton Hotels Corporation will
be the largest and most geographically diverse lodging company in the
world, with nearly 2,800 hotels and 475,000 rooms in 80 countries,
operating under the industry's most respected brand names, including
Hilton, Conrad, Doubletree, Embassy Suites, Hampton Inn, Hilton Garden
Inn, Homewood Suites by Hilton, Scandic and Hilton Grand Vacations
Club. 
Included in the acquisition are 40 hotel properties currently
owned by HI (most of which are in the UK and Europe,) 200 leased
properties, approximately 160 fee contracts (mostly management
contracts) and approximately 80 LivingWell Health Clubs (most of which
are managed.) HHC will also acquire in the transaction full ownership
of Hilton HHonors Worldwide and Hilton Reservations Worldwide, which
have been 50/50 joint ventures with HI and managed as part of the
strategic alliance between HHC and HI. HHC will also obtain worldwide
ownership of the luxury Conrad Hotels brand, which has operated as a
joint venture between the two companies since 2002. 
On a pro forma full year basis (assuming the transaction closed
December 31, 2005,) the combined entity is expected to have 2006
Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) of approximately $1.7 billion, and be accretive to HHC's
expected stand-alone 2006 earnings. 
"This transaction represents the final and logical step in a
process that began in 1997 with the signing of our strategic alliance,
and is a unique opportunity to once again position HHC as a global
lodging industry leader for the first time in more than 40 years,"
said Stephen F. Bollenbach, HHC co-chairman and chief executive
officer. "With the current strength of our business in the U.S., our
strong balance sheet, the beginning of a hotel industry recovery in
the U.K. - which accounts for about a third of HI's income - and the
success we've had in working together with HI for eight years on such
programs as Hilton HHonors, Hilton Reservations, Conrad development
and technology initiatives, the time is right to put these two great
organizations together." 
David Michels, chief executive of Hilton Group plc, said: "I am
very proud of the Hilton brand, which has consistently been
acknowledged as one of the world's leading brands. Our customers can
look forward to enjoying even more opportunities as a result of the
combined strengths of the brands." 
HHC noted that the strategic benefits of the transaction include: 
--  making HHC a true global company and competitor; 
--  enabling the company to fully control the flagship Hilton 
brand - the most powerful brand in the industry - on a 
worldwide basis; 
--  opening expansion opportunities for all Hilton Family brands 
in all parts of the world; 
--  opportunity to implement its OnQ system throughout the world; 
--  enhancement of the company's portfolio, including a number of 
world-class resorts; 
--  diversification of earnings and cash flow outside the U.S., 
and 
--  further stabilizing earnings by increasing income from 
managing, leasing and franchising. 
The company anticipates significant growth opportunities for its
worldwide system for many of its brands through franchise and
management agreements. The current HI development pipeline consists of
signed contracts for 58 hotels with 14,000 rooms. HHC's development
pipeline currently consists of 520 hotels and approximately 64,000
rooms. 
"Brand development is becoming a more accepted concept
internationally, providing exciting opportunities for all our brands
in many important markets around the world," Mr. Bollenbach said.
"There is an appetite among global hotel owners for strong brands in
the full-service, focused-service and all-suite segments, and our
brand portfolio is uniquely positioned to fill that need." 
Consistent with its successful asset disposition strategy in the
U.S. - which has resulted in 20 hotels being sold year-to-date for a
total of more than $1 billion - while retaining long-term management
or franchise contracts, HHC plans to continue the international asset
disposition program currently being undertaken by HI, retaining
management or franchise agreements. Proceeds from asset sales
completed by HHC after the transaction will be used to repay debt. 
The transaction will be financed with cash on hand at the time of
the closing (estimated to be approximately $1.2 billion,) and a new
bank facility. The financing is led by Bank of America and UBS. 
The combined company will be headquartered in Beverly Hills,
California, with Mr. Bollenbach as co-chairman and chief executive
officer, Matthew J. Hart as president and chief operating officer,
Robert M. La Forgia as senior vice president and chief financial
officer, and the remainder of the HHC senior management team remaining
in their current positions. Ian R. Carter, currently chief executive
of Hilton International, will join HHC as executive vice president and
chief executive officer of Hilton International, with responsibility
for managing international operations reporting to Mr. Hart. Thomas L.
Keltner, executive vice president and president of HHC's brand
performance and development group, continues reporting to Mr. Hart in
that position. HHC anticipates retaining the majority of HI's
operating and development team as well as other executives. 
Concurrent with signing the agreement, Mr. Michels resigned his
position on the Board of Directors of HHC, and Mr. Bollenbach resigned
his position on the Board of Hilton Group. 
"HI has an experienced and talented team of professionals with
unsurpassed knowledge of international markets, and as we have come to
know and work with them during the successful eight years the alliance
has been in place, we are excited about the role they and our existing
management team will play in the future growth and prosperity of our
company," Mr. Bollenbach said. 
While many operational efficiencies have already been realized
through the strategic alliance, HHC does expect to realize
approximately $30 million in annual cost savings going forward. HHC
also anticipates realizing a number of revenue enhancing synergies,
primarily from new opportunities to grow its brands on a global basis,
and worldwide implementation of HHC's proprietary "OnQ" technology
system. 
After creating the industry's first global lodging company under
the leadership of company founder Conrad N. Hilton, HHC spun off its
international business to shareholders in 1964. That business went
through a number of owners, ultimately being acquired in 1987 by
U.K.-based Ladbroke Group PLC. In 1997, Mr. Bollenbach - who had
become HHC's CEO in 1996 - forged a strategic alliance with HI (the
lodging subsidiary of Ladbroke) creating joint ownership of the Hilton
HHonors guest loyalty program and Hilton Reservations Worldwide, and
cooperative sales and marketing programs, presenting to the traveling
public a united "Hilton" brand on a worldwide basis. Acknowledging the
strength of the alliance and the Hilton brand name, Ladbroke
subsequently changed its name to Hilton Group plc. 
"As the alliance developed, benefiting both companies and our
millions of global customers, we always envisioned the formal coming
together of Hilton's domestic U.S. and international businesses," Mr.
Bollenbach said. "The enthusiasm of both companies' Boards of
Directors for making the new worldwide Hilton Hotels Corporation a
reality has been a key element in this transaction, which we are
confident will bring value to our guests, our team members, our owners
and our shareholders for years to come." 
HHC's lead advisor was UBS Securities LLC, with Bank of America
Securities LLC and Morgan Stanley as co-advisors. 
Hilton Hotels Corporation is recognized internationally as a
preeminent hospitality company. The company develops, owns, manages or
franchises more than 2,300 hotels, resorts and vacation ownership
properties. Its properties includes many of the world's best known and
most highly regarded hotel brands including Hilton(R), Conrad(R),
Doubletree(R), Embassy Suites Hotels(R), Hampton Inn(R), Hampton Inn &
Suites(R), Hilton Garden Inn(R), Hilton Grand Vacations Company(R) and
Homewood Suites by Hilton(R). 
Hilton International (HI), an operating division of the UK based
Hilton Group plc, owns the rights to the Hilton brand name throughout
the world, with the exception of the USA. HI operates 403 hotels, with
some 261 branded Hilton, 47 of which under the Hilton Worldwide
Resorts, plus 142 under the mid-market Scandic brand. Under a joint
venture agreement, Hilton International and the North American based
Hilton Hotels Corporation (HHC) share responsibility for the Conrad
brand, which includes luxury hotels in several markets around the
world. 
Note: This presentation contains "forward-looking statements"
within the meaning of federal securities law, including statements
concerning business strategies and their intended results, and similar
statements concerning anticipated future events and expectations that
are not historical facts. The forward-looking statements in this
presentation are subject to numerous risks and uncertainties,
including the effects of economic conditions; supply and demand
changes for hotel rooms; competitive conditions in the lodging
industry, relationships with clients and property owners; the impact
of government regulations; changes in foreign currency exchange rates;
and the availability of capital to finance growth, which could cause
actual results to differ materially from those expressed in or implied
by the statements herein. 
Analyst/Investor Conference Call Information 
Hilton Group will conduct a conference call for investors and
analysts December 29 at 4:30 p.m. London time (11:30 a.m. in New
York). Call-in number 44-0207-162-0025, passcode 688858. 
Hilton Hotels Corporation will conduct a conference call today,
December 29, for investors and analysts at 1:00 p.m. Eastern time
(6:00 p.m. in London). Media may participate in a listen-only mode.
Call-in numbers: 866-383-8119 (domestic)/617-597-5344 (international),
passcode #43013264. A replay of the call will be available by
telephone until Thursday, January 5, 2006 at 8:00 p.m. Eastern time
(5:00 p.m. Pacific.) To access, dial 888-286-8010
(domestic)/617-801-6888 (international), passcode #43013264.
Additionally, a replay will be available indefinitely on
hiltonworldwide.com. 
The power point presentation management will review is available
at www.hiltonworldwide.com; click the investor relations tab, then
click on HHC/HI Transaction link. 
Media Conference Call Information 
Hilton Group will conduct a conference call for media December 29
at 5:15 p.m. London time (12:15 p.m. in New York). Call-in number
44-0207-162-0025, passcode 688859. 
Hilton Hotels Corporation will conduct a conference call today,
December 29, for news media at 3:00 p.m. Eastern time (8:00 p.m. in
London). Call in numbers: 866-831-6234 (domestic)/617-213-8854
(international), passcode #98092383. A replay will be available
indefinitely on Hiltonworldwide.com 
Webcast Information 
The conference call will also be webcast simultaneously via
Hilton's investor relations website. Investors or media wishing to
access the call on the web should log on to www.hiltonworldwide.com,
click the investor relations tab and click on the HHC/HI Transaction
link. 
Access to Additional Information 
Investor presentation, fact sheets, executive biographies and
photos are available at www.hiltonworldwide.com, click the investor
relations tab, then click on HHC/HI Transaction link. 
CONTACT:
Hilton Hotels Corporation
Atish Shah (Investor Contact), 310-205-8664
Atish_Shah@hilton.com
or
Kathy Shepard (Media Contact), 310-205-7676
Kathy_Shepard@hilton.com
or
Marc Grossman (Corporate Affairs), 310-205-4030
Marc_Grossman@hilton.com
http://www.hiltonworldwide.com
 
 
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