29th Dec 2005 16:26
Hilton Group PLC29 December 2005 29 December 2005 FOR IMMEDIATE RELEASE Hilton Group plc signs agreement for the sale of its hotel division toHilton Hotels Corporation Hilton Group plc announces that it has today signed a conditional agreement forthe sale of its hotels and leisure division, Hilton International, to HiltonHotels Corporation ("HHC") for a cash consideration of approximately £3.3billion which, when added to the proceeds of the recent sale of 16 UK HiltonInternational hotels, realises a total of approximately £3.7 billion for itshotels and related assets. Upon completion, it is planned that Hilton Group plc will be renamed Ladbrokesplc. Sir Ian Robinson will continue as Chairman, supported by the existing NonExecutive Directors, other than Stephen Bollenbach who has resigned as adirector. Christopher Bell will become the Chief Executive and John O'Reillyand Alan Ross will join the Board as Executive Directors with effect fromCompletion. Rosemary Thorne has been appointed as Finance Director with effectfrom Completion. It is expected that a substantial amount of cash will be returned toshareholders early in the second quarter of 2006 following a review of theappropriate capital structure for the new Ladbrokes plc. Commenting on the disposal, Sir Ian Robinson, Hilton Group Chairman said: "We believe this transaction delivers significant shareholder value. The Boardis fully committed to Ladbrokes, which it believes is a strong and valuablebusiness which will be well placed to deliver growth and good returns." Stephen Bollenbach, Chairman of Hilton Hotels Corporation, commented: "This transaction represents the final and logical step in a process that beganin 1997 with the signing of a strategic alliance between HHC and HiltonInternational as a global lodging industry leader. Hilton International has anexperienced and talented team of professionals with unsurpassed knowledge ofinternational markets, and we are excited about the role they and our existingteam will play in the future growth and prosperity of our company. " David Michels, Chief Executive of Hilton Group plc, said: "This is a good deal for our shareholders and will offer new opportunities forthe 70,000 employees currently working in Hilton International around the globe.I am very proud of the Hilton brand, which has consistently been acknowledgedas one of the world's leading brands. I fully expect the enlarged company togrow and our customers can look forward to enjoying even more opportunities as aresult of the strengths of the unified businesses." Christopher Bell, Chief Executive of new Ladbrokes plc, said: "Ladbrokes has a clear business strategy that has delivered strong results inrecent years and leaves us well placed to prosper as a stand alone company. Ourkey assets - brand leadership, highly experienced management and an ability toinnovate put us in a strong position to succeed in the international betting andgaming market place." Following completion (expected to be in the first quarter of 2006), Ian Carter(Chief Executive of Hilton International) will take up the role of ExecutiveVice President and CEO of Hilton International at HHC. In addition, at HHC'srequest, David Michels and Brian Wallace have agreed to transfer to the enlargedcompany to assist in the transition process. This summary should be read in conjunction with the full text of thisannouncement. Notes to Editors • The disposal is conditional on, among other things, receipt ofnecessary competition and other government clearances, there being no materialadverse change in the financial or trading position or prospects of HiltonInternational (City Code standard), and the approval of Hilton Group plcshareholders. • David Michels has today resigned from the HHC board. • Ms Thorne was the Group Finance Director of Bradford & Bingley plcfrom November 1999 to December 2005 and, prior to that, between March 1992 andNovember 1999, she was an executive director of J Sainsbury plc where she heldthe position of Group Finance Director. Ms Thorne was a non-executive directorof Royal Mail plc from October 1998 to March 2004 and has been a non-executivedirector of Cadbury Schweppes plc since September 2004. She is currently amember of the Financial Reporting Council and a member of the FinancialReporting Review Panel. Enquiries Hilton Group plc David Michels, Group Chief Executive +44 (0) 20 7856 8109 Brian Wallace, Group Finance Director +44 (0) 20 7856 8109 Christopher Bell, Chief Executive, Ladbrokes Worldwide +44 (0) 20 7856 8109 Alex Pagett, Group Corporate Affairs Director (mobile: +44 (0) 7974 229 888) Julian Arlett, Investor Relations (mobile: +44 (0) 7974 229 462) Linda Bain, Group Corporate Communications (mobile: +44 (0) 7974 229 247) Ciaran O'Brien, Ladbrokes Media Relations (mobile: +44 (0) 7976 180 173) Tel: +44 (0) 20 7856 8109 Deutsche Bank AG London Nigel Meek +44 (0) 20 7545 6882 Roger Aylard +44 (0) 20 7547 6855 Alastair Mathieson +44 (0) 20 7547 6818 Toby Clark (Corporate Stockbroking) +44 (0) 20 7547 6914 Conference Calls 4:30pm (GMT) - Hilton Group Conference call for Analysts and Investors A conference call for analysts and investors will take place at 4:30pm (GMT)today. To participate in the conference call dial +44 (0) 20 7162 0025 and askfor the Hilton Group Announcement. A recording of this conference call will beavailable until 12 January 2006 and can be accessed by dialing +44 (0) 20 70314064 and quoting the passcode 688859. 5:15pm (GMT) - Hilton Group Conference call for the Media A conference call for the media will take place at 5:15pm (GMT) today. Toparticipate in the conference call dial +44 (0) 20 7162 0025 and ask for theHilton Group Announcement. A recording of this conference call will beavailable until 12 January 2006 and can be accessed by dialing +44 (0) 20 70314064 and quoting the passcode 688858. An audiocast of both calls will also be available on our corporate website,www.hiltongroup.com. A corresponding presentation for the planned Media andAnalyst and Investors calls can be found in the 'Investor Centre' on the HiltonGroup plc website. 6:00pm (GMT) - HHC Conference call for Analysts and Investors A conference call for analysts and investors will also be hosted by HHC and willtake place at 6:00pm (GMT) today. To participate in the conference call, dial866 383 8119 (US domestic number) or, if phoning internationally, dial 00 (1)617 597 5344 and for both numbers quote the passcode: 43013264. 8.00pm (GMT) - HHC Conference call for Media A conference call for media will also be hosted by HHC and will take place at 8:00pm (GMT) today. To participate in the conference call, dial 866 831 6234 (USdomestic number) or, if phoning internationally, dial 00 (1) 617 213 8854 andfor both numbers quote the passcode: 98092383. This announcement is for information purposes only and does not constitute anoffer or invitation to acquire or dispose of any securities or investment advicein any jurisdiction. A circular containing further details relating to the Disposal (the "Circular")and setting out the notice of the Extraordinary General Meeting is expected tobe posted to Shareholders by 4 January 2006. Deutsche Bank AG is acting as financial advisor and corporate broker to HiltonGroup plc on the disposal of the Hilton International Hotels Division. Deutsche Bank AG, which is authorised by Bundesanstalt furFinanzdienstleistungsaufsicht and by the Financial Services Authority (''FSA'')and is regulated by the FSA for the conduct of UK business, is acting for HiltonGroup plc and no one else in relation to (or in connection with) the Disposaland will not be responsible to anyone other than Hilton Group plc for providingthe protections afforded to clients of Deutsche Bank AG or for providing advicein relation to the Disposal or on any matter referred to in this announcement. This announcement contains forward-looking statements which are based on theBoard's current expectations and assumptions and involve known and unknown risksand uncertainties that could cause actual results, performance or events todiffer materially from those expressed or implied in such statements. HiltonGroup plc does not undertake any obligation publicly to update or revise anyforward-looking statement as a result of new information, future events or otherinformation, although such forward-looking statements will be publicly updatedif required by the Listing Rules, the rules of the London Stock Exchange or bylaw. It is believed that the expectations reflected in these statements arereasonable, but they may be affected by a number of variables which could cause actual results or trends todiffer materially, including, but not limited to, factors that are beyond HiltonGroup plc's ability to control or estimate precisely, such as delays inobtaining, or adverse conditions contained in, regulatory approvals, competitionand industry restructuring, changes in economic conditions, currencyfluctuations, changes in interest and tax rates, changes in energy marketprices, changes in historical weather patterns, changes in laws, regulations orregulatory policies, developments in legal or public policy doctrines,technological developments, the failure to retain key management, theavailability of new acquisition opportunities or the key timing and success offuture acquisition opportunities. Each forward-looking statement speaks only asof the date of the particular statement. 29 December 2005 FOR IMMEDIATE RELEASE PROPOSED DISPOSAL OF THE HILTON INTERNATIONAL HOTELS DIVISION AND ASSOCIATEDCHANGE OF NAME 1. Introduction The Company announces that it has today conditionally agreed to dispose of theHilton International Hotels Division for a total cash consideration of £3.298billion, subject to certain adjustments relating to the amounts of debt, cashand working capital in the Hilton International Hotels Division on 31 December2005. When the consideration payable in relation to the Disposal is added to theproceeds of the recent sale of 16 hotels to The Managed Hotels Unit Trust (for agross consideration of £397.2 million, as announced on 22 November and on 6December 2005), Hilton Group plc will have realised a total of approximately£3.7 billion for its hotel and related assets. Subject to the outcome of thereview referred to in paragraph 4, the Board expects to make a substantialreturn of cash to Shareholders in due course, further information in relation towhich is set out in paragraph 4 of this announcement. In view of the size of the Disposal relative to the size of the Group, theDisposal constitutes a class 1 transaction for the purposes of the ListingRules. Completion is therefore conditional upon, amongst other things, theapproval of Shareholders. Details of the time, date and venue of theExtraordinary General Meeting of the Company to consider the Disposal will beset out in the Circular which is expected to be posted to Shareholders by 4January 2006. 2. Background to and reasons for the Disposal The Company acquired the Hilton International Hotels Division in 1987 and, sincethen, it has made a significant contribution to the profitability of the Group.In 1997, HHC and the Company, which own the rights to the Hilton name and brandin the United States and the rest of the world respectively, reunited the Hiltonbrand under a strategic alliance that included joint marketing programmes, anintegrated reservation system (which replaced the joint reservation system whichhad previously been operated), a joint loyalty programme and a consistent brandimage throughout the world. Pursuant to these arrangements, Hilton Internationalalso granted HHC an exclusive licence to grant franchises under the Hilton namein Mexico, Canada and the Caribbean island of St. John. Since 1997, there hasbeen a close relationship and regular dialogue between the Company and HHC. InJuly 2005, an approach was made by HHC in relation to the potential acquisitionof the Hilton International Hotels Division. The Independent Directors believe the agreed price is attractive and offers afull and fair valuation of the Hilton International Hotels Division. TheIndependent Directors have therefore taken the decision to recommend thatShareholders now crystallise the value inherent in the Hilton InternationalHotels Division by means of the Disposal. The Independent Directors believe that, following Completion, the new Ladbrokesplc, as a stand-alone betting and gaming business, will benefit from: (a) being valued independently on the stock market as a pure betting and gamingbusiness; (b) the ability to develop a capital structure and dividend policy appropriateto a pure betting and gaming business; and (c) being able to retain, motivate and recruit key personnel more effectively. 3. Principal terms and conditions of the Disposal The Hilton International Hotels Division will be sold to HHC for a total cashconsideration payable on Completion of £3.298 billion, subject to certainadjustments relating to the amounts of debt, cash and working capital in theHilton International Hotels Division on 31 December 2005. When theconsideration payable in relation to the Disposal is added to the proceeds ofthe recent sale of 16 hotels to The Managed Hotels Unit Trust (for a grossconsideration of £397.2 million, as announced on 22 November and 6 December2005), Hilton Group plc will have realised a total of approximately £3.7 billionfor its hotel and related assets. HHC will receive the benefit of the trading of the Hilton International HotelsDivision from 1 January 2006 (subject in certain circumstances to adjustment ifCompletion is delayed materially). The purchase price will be adjusted by the amount by which third party financialindebtedness of the Hilton International Hotels Division exceeds the cash in theHilton International Hotels Division (after allowing for a £30 million cashfloat). The purchase price will also be adjusted if the negative workingcapital of the Hilton International Hotels Division falls outside the range of£95 million (negative) to £135 million (negative). This Disposal is conditional on (i) the passing by Shareholders at the EGM ofthe resolution to approve the Disposal; (ii) receipt of necessary competitionand other government clearances; (iii) no government body having taken actionwhich prohibits Completion or prohibits the Sellers or HHC from giving effect tocertain transitional arrangements to an extent materially adverse in the contextof the transaction taken as a whole; (iv) no material adverse change havingoccurred in the financial or trading position or prospects of the business ofthe Hilton International Hotels Division which, if the Disposal had beengoverned by the City Code, the Takeover Panel would be reasonably likely topermit HHC to invoke as grounds on which to withdraw from an offer; (v) no eventhaving occurred which would prevent Completion from occurring; (vi) certainWarranties not being breached (to an extent which gives rise to a loss of over£300 million); (vii) certain interim conduct of business covenants not beingbreached (to an extent which gives rise to a loss of over £100 million) (viii)the delivery of certain certificates by the Group Chief Executive (DavidMichels) and Group Finance Director (Brian Wallace) at Completion; (ix) theexecution of certain agreed ancillary documents; and (x) certain reorganisationsteps having been completed. The Disposal Agreement may also be terminated (a) by HHC if Hilton Group plcfails to post the Circular by 31 January 2006 or the Independent Directorswithdraw their recommendation to shareholders to vote in favour of theresolution to approve the Disposal or if the financial information in theCircular differs materially from the financial information provided to HHC and(b) by either Hilton Group plc or HHC if Completion has not occurred by 30 June2006. Hilton Group plc has agreed to pay a break fee to HHC of £37 million(inclusive of costs and expenses) together with an amount in respect of any VATarising if the Hilton International Hotels Division is sold to a third party orif certain other specified events, including the withdrawal by the Board of itsrecommendation to Shareholders referred to above, occur. 4. Use of proceeds The Board has initiated a review to determine the appropriate capital structurefor the new Ladbrokes plc following the Disposal in light of (i) its expectedcapital requirements; (ii) its actual debt position following the Disposal(taking into account the number of Convertible Bonds, if any, which have thenbeen converted into Ordinary Shares); (iii) its assessment of contingencies andthe need for any reserves; (iv) potential investment opportunities; and (v) itsfunding obligations in relation to the Hilton Group Pension Plan. The Board and the Hilton International Hotels Division (after it has beenacquired by HHC) intend to make a payment into the Hilton Group Pension Plan sothat it is funded on the more prudent of the IAS 19 basis (as at Completion) andthe trustees' funding basis (as at 1 July 2005). Half of the cost of thecontribution will be borne by the new Ladbrokes plc and half by the HiltonInternational Hotels Division (after it has been acquired by HHC). As at 1 July2005, the scheme deficit on the trustees funding basis was approximately £111million. The amount of the deficit calculated on the IAS 19 basis as at thedate of Completion will only be known following that date and will depend,principally, on investment values at the date of Completion. The minimum paymentinto the Hilton Group Pension Plan will therefore be £111 million, £55.5 millionof which will be borne by the new Ladbrokes plc. Subject to the outcome of the review referred to above, the Board expects to beable to make a substantial return of cash to Shareholders early in the secondquarter of 2006 (assuming Completion occurs in the first quarter of 2006). It ispossible that any return of cash to Shareholders will be in a form that would betaxed as income rather than capital in the hands of Shareholders. The Board expects to announce proposals for a return of cash to Shareholders indue course. Until the proposals to be announced by the Board are implemented,the proceeds of the Disposal and the proceeds of the sale of 16 hotels asdescribed in paragraph 1 will be deposited in the money market with banks, orinvested in money market funds or other short term investments. 5. Effect of the Disposal on the Ladbrokes Group The Company will sell the whole of its hotel, timeshare, health clubs andrelated businesses, with the exception of a passive investment in the TindallPartnership (landlord to certain Hilton International hotel properties) and,pending receipt of clearance for their transfer, two hotel management contractsheld in the name of an entity which will remain with new Ladbrokes plc. A pro forma income statement will be included in the Circular which will beprepared for illustrative purposes only and will address a hypotheticalsituation. It will demonstrate that, if the Disposal had been effected at 1January 2004, revenues for the Group for the year ended 31 December 2004 wouldhave been £10.123 billion and EBIT would have been £258.7 million. David Michels, Brian Wallace and Ian Carter will resign from the Board atCompletion. John O'Reilly and Alan Ross will be appointed to the Board onCompletion as, respectively, Managing Director Ladbrokes eGaming and TelephoneBetting and Managing Director Ladbrokes European Retail. On Completion,Christopher Bell will be appointed as Chief Executive. Rosemary Thorne will joinLadbrokes as Finance Director from 16 January and will join the Board onCompletion. Immediately following Completion, the Board will comprise: Sir Ian Robinson*, Chairman Christopher Bell, Chief Executive John O'Reilly, Managing Director of Ladbrokes eGaming and Telephone Betting Alan Ross, Managing Director Ladbrokes European Retail Rosemary Thorne, Finance Director Ian Livingston*+++ L. Patrick Lupo*++• Nicholas Jones*+ Christopher Rodrigues*+ C. Pippa Wicks*+ * Non-executive director. ++ Member of the Remuneration Committee. + Member of the Audit Committee. • Senior Independent Director. The service contracts of Messrs O'Reilly and Ross may be revised afterCompletion. The current terms and conditions of the service contracts of MessrsBell, O'Reilly and Ross, and Ms Thorne are as set out below: (a) Christopher Bell entered into a service contract dated 9 May 2003 with theCompany (as amended by a side letter dated 20 November 2003). His basic salaryis £400,000 per annum which, subject to Completion, will increase to £550,000.He is entitled to receive 12 months' notice of termination from his employer andmust give his employer not less than six months' notice. (b) Rosemary Thorne entered into a service agreement with the Company on 28December 2005, at a salary of £350,000. She is entitled to receive 12 months'notice of termination from her employer and must give her employer six months'notice (save that, if Completion does not occur, she may terminate her contractat any time between 1 June and 31 August 2006 by giving only one month'snotice). (c) Alan Ross entered into a service agreement with Ladbroke Casinos Limiteddated 1 December 1998. He has since been appointed as Managing DirectorLadbrokes European Retail. His current salary is £184,862 which, subject toCompletion, will increase to £260,000. He is entitled to receive 12 months'notice of termination from his employer and must give his employer six months'notice. (d) John O'Reilly entered into a service agreement with Ladbrokes Limited dated27 November 1992. He has since been appointed as Managing Director LadbrokeseGaming and Telephone Betting. His current salary is £200,000 which, subject toCompletion, will increase to £300,000. He is entitled to receive 12 months'notice of termination from his employer and must give his employer six months'notice. (e) The main benefits to which Messrs Bell, O'Reilly and Ross, and Ms Thorne areentitled are as follows: (i) participation in the Employee Share Schemes; (ii) pension scheme membership; (iii) long-term disability plan membership; (iv) personal accident insurance; (v) life assurance; (vi) private health care plan membership; and (vii) fully expensed car. 6. Information on the Group The Group's business comprises the Hilton International Hotels Division, aleading global hotel business, and Ladbrokes which is the world's leadingbetting company. The Group's revenue from continuing operations for the six months ended 30 June2005 was £6,598.9 million and EBITDA for the same period was £280.2 million.Profit before tax for this period was £201.9 million. As at 30 June 2005, theGroup had net assets of £2,472.4 million and gross assets of £5,331.4 million ofwhich £4,190.5 million was attributable to the Hilton International HotelsDivision. For the 12 months ended 31 December 2004, the Group's revenue from continuingoperations was £11,893.4 million and EBITDA was £548.8 million. The Group'sprofit before finance costs and tax for this period was £417.1 million of which£158.4 million was attributable to the Hilton International Hotels Division and£272.8 million to Ladbrokes, £0.2 million of other income, less £14.3 million ofGroup central costs. Profit before tax for the Group for this period was £376.1million. 6.1 Information on the Hilton International Hotels Division HHC demerged Hilton International as an independent corporation in 1964, withHHC having exclusive rights to use the Hilton name in the US and HiltonInternational having the exclusive rights to use the Hilton name throughout therest of the world. Ladbroke Group PLC (renamed Hilton Group plc in May 1999) purchased HiltonInternational in 1987. At the time, the Company had already established itselfas one of the UK's leading bookmakers. In 1997, the Company and HHC reunited theHilton brand under a strategic alliance that included joint marketingprogrammes, an integrated reservation system (which replaced the jointreservation system which had previously been operated) and a joint loyaltyprogramme, as well as a consistent brand image throughout the world. Pursuant tothese arrangements, Hilton International granted HHC an exclusive licence togrant franchises under the Hilton name and brand in Mexico, Canada and theCaribbean island of St. John. The Company and HHC also set up a 50/50 jointventure relating to the Conrad luxury brand. Subsequently, the HiltonInternational Hotels Division has grown both organically and throughacquisition. In March 1999, Hilton International purchased Stakis plc and, inJune 2001, it acquired Scandic Hotels AB. As at 30 June 2005, the Hilton International Hotels Division operated 402 hotelsin 80 countries: 226 branded Hilton, 37 branded Hilton Worldwide Resorts and 139under the mid-market Scandic brand. Under a joint venture agreement, HiltonInternational and HHC share the responsibility for the development of the Conradbrand. The Hilton International Hotels Division also operates the LivingWell health andfitness business which has 92 clubs and approximately 154,000 members worldwide. The senior management of the Hilton International Hotels Division consists of: David Michels Group Chief Executive Brian Wallace Deputy Group Chief Executive & Group Finance Director Ian Carter Chief Executive, Hilton International Simon Barlow President Hilton International, The Americas Philip Bowcock Vice President Finance, Hilton International Adrian Bradley Senior Vice President Real Estate, Hilton International Keith Burnett Managing Director, LivingWell Roger Devlin Group Corporate Development Director Jurgen Fischer President Hilton International,Commercial Operations Group Howard Friedman President Hilton International, UK & Ireland Jean-Paul Herzog President Hilton International, Nordic Koos Klein President Hilton International, Middle East & Asia Pacific Wolfgang Neumann President Hilton International, Europe and Africa Alex Pagett Group Corporate Affairs Director Mark Selawry Senior Vice President Productivity and Outsourcing, Hilton International Bryan Taker Head of Group Human Resources and Legal Services 6.2 Information on Ladbrokes Established in 1886, Ladbrokes is the world's leading betting company with 2,573high street betting shops and strong market positions in the UK, Ireland andBelgium. Ladbrokes is one of the best known betting and gaming brands in theworld and currently enjoys the highest brand awareness in its sector in theUnited Kingdom. Ladbrokes is promoting its brand overseas through its onlinedivision, alliances and international partners. Ladbrokes offers an international online service, providing betting, casino,poker and numbers games to nearly two million registered customers in over 200countries, in 12 languages and using 18 currencies. Ladbrokes' online businesslinks directly to its retail and telephone betting business through a singlecustomer accounting system that enables customers to register, deposit money,place bets and collect winnings through any of Ladbrokes' distribution channels. The UK and international betting markets have demonstrated significant growth inrecent years. The Directors believe Ladbrokes is well positioned to takeadvantage of future growth given the strength of the Ladbrokes brand and itsexperienced management team. Ongoing product and technological innovationcoupled with certain favourable changes to the regulatory environment areexpected to increase the number of betting opportunities available forLadbrokes' customers across all betting mediums. To ensure that customers takeadvantage of these new betting opportunities, Ladbrokes continuously strives for"best-in-class" customer service and aims to achieve this through training of,and investment in, its staff and through the continued investment in its shopportfolio, telephone and eGaming infrastructure. 7. Current trading and prospects Trading at the Group has been in line with the Board's expectations since thepublication of the November trading statement and the Board remains confident ofthe underlying financial and trading prospects of the Group for the currentfinancial year. In 2006 the Ladbrokes retail business intends to build on its strong marketpositions in the UK and Ireland, and the Board expects that the UK and Irelandbusinesses will benefit from (i) the full year impact of the acquisitions itcompleted in 2005; (ii) further shop relocations; (iii) new licences; and (iv)shop refurbishments. The roll out of Ladbrokes Xtra is expected to giveLadbrokes greater scope to present customers with more betting opportunities andexclusive Ladbrokes' products. Ladbrokes' eGaming and telephone businesses intend to further exploit theLadbrokes brand, with the Football World Cup 2006 offering significantopportunities to further present its product range to an increasing number ofcustomers around the world. Ladbrokes recently launched "Financial Fixed Odds"and "Live Dealer" casino games, and product innovation will continue during2006. Ladbrokes is in discussions with several overseas partners, continuing its driveto exploit its brand and management expertise. The Ladbrokes casino, at theHilton Paddington, is planned to open in Autumn 2006. The pre-budget report released by HM Government on 5 December 2005 includedfuture changes to the taxation regime in respect of fixed odds bettingterminals. The impact of the announced immediate move from gross profit tax toVAT on fixed odds betting terminals is not material for the Ladbrokes Group for2005. However, the impact on the Ladbrokes Group of changes effective in 2006cannot be assessed until the new taxation rules relating to the rates ofamusement machine licence duty on fixed odds betting terminals are announced. Overall, the Board views the prospects of the Ladbrokes Group with confidence asit pursues its strategy focused entirely on betting and gaming and the growthopportunities that brings, particularly online and through the introduction ofinnovative products and new technology. 8. Recent announcement regarding Ladbrokes Following press speculation, Hilton Group plc made the following announcement on22nd December 2005: "The Board of Hilton Group plc has noted speculation in today's press regardingLadbrokes. The Board confirms that, following the announcement of discussionswith Hilton Hotels Corporation on 14 October 2005, it has received expressionsof interest in Ladbrokes. However, Hilton Group remains focused on concludingits negotiations with Hilton Hotels Corporation in relation to the sale of theHilton International hotels division for the benefit of shareholders. The Boardhas great confidence in the future of Ladbrokes." 9. Shareholder privileges Currently Shareholders receive certain privileges at Hilton hotels andLivingWell health clubs. Following Completion, Hilton hotels and LivingWellhealth clubs will not be part of the Ladbrokes Group and, consequently, thesebenefits will terminate with effect from 31 December 2006. HHC has agreed tohonour the terms of such benefits until that date in respect of bookings madeprior to the date of the forthcoming EGM. No privilege cards with these benefitswill be issued after Completion. 10. Change of name It is proposed that on Completion, and subject to the Shareholders approving theDisposal at the EGM, the name of the Company be changed to Ladbrokes plc.Completion is not, however, conditional on this change of name. The Directorsbelieve that the name Ladbrokes plc will better reflect the operations of theCompany after Completion. 11. Retained guarantees The Company is currently the guarantor of certain obligations of subsidiarieswithin the Hilton International Hotels Division (relating, principally, toobligations under leases). These contingent obligations will continue followingCompletion. HHC has agreed to indemnify the Company against any liabilities thatit incurs pursuant to these guarantees following Completion, save to the extentthat the liability is caused by any action of a member of the Ladbrokes Group. 12. Warranties and indemnities Ladbroke Group International Limited and Ladbroke Group Limited (the members ofthe Group that are the 'Sellers' under the Disposal Agreement) have givencertain limited warranties about the state of affairs of the companies andproperties within the Hilton International Hotels Division at the date of theDisposal Agreement (repeated, in certain instances, as at Completion) which willentitle HHC to claim damages after Completion if they prove to be untrue (the ''Surviving Warranties''). Certain other limited warranties about the state ofaffairs of the companies and properties within the Hilton International HotelsDivision at the date of the Disposal Agreement have been given which do notentitle HHC to claim damages if they prove to be untrue but operate, in effect,as conditions. The Surviving Warranties are subject to certain customarylimitations. The Sellers have agreed to give a limited indemnity to HHC against certainliabilities in relation to past operations under the Associated Contracts andhave given other customary indemnities, including an indemnity against anycorporation tax payable by any UK-incorporated members of the HiltonInternational Hotel Division for accounting periods ended on or before 31December 2005. The obligations of the Sellers are guaranteed by Hilton Group plc. 13. Directors It is a term of the Disposal Agreement that the Company releases each of DavidMichels, Brian Wallace and Ian Carter from their respective service contractswith the Company with effect from Completion, as HHC regards their knowledge andexpertise as important to the business of the Hilton International HotelsDivision. HHC is, therefore, making offers of employment (conditional onCompletion) to these individuals. Acceptance by Messrs Michels, Wallace and Carter of offers of employment made byHHC will relieve the Company of any obligation to make severance payments tothese Directors which would have been payable if, following Completion, therewas no on-going role within the Ladbrokes Group for them. 14. Employee share schemes In circumstances such as the Disposal, where a subsidiary or a number ofsubsidiary companies are sold out of a group, it is normal practice for theemployees of those subsidiary companies to be able to exercise share optionsgranted and for share awards held to vest (subject to any performance conditionsthat continue to apply). Shareholder approval is not required in thesecircumstances. Therefore, in line with normal practice, and consistent with the way in whichoptions and awards have been dealt with by the Company on previous disposalsfrom the Group, the Remuneration Committee, in the exercise of powers delegatedto it by the Board, has determined that options and awards granted to HiltonInternational Hotels Division employees under the 1978 Scheme, the InternationalScheme, the Performance Share Plan, the Deferred Bonus Plan and the MatchingShares Plan will become exercisable or vest as a consequence of the Disposal. Inaccordance with the rules of the Performance Share Plan, awards under that planwill vest to the extent that performance conditions have been satisfied and timepro rated to reflect the period which has elapsed since the date of grant. Noperformance conditions need to be satisfied under the rules of any of the otherEmployee Share Schemes. As a consequence of the Disposal, options held by Hilton International HotelsDivision employees under the Sharesave Scheme and the Stakis Scheme will becomeexercisable automatically and shares held in the SIP trust will be transferredautomatically to the relevant Hilton International Hotels Division employees whoparticipate in the SIP. Options and awards held by Ladbrokes Group employees under the Employee ShareSchemes will not be affected by the Disposal. However, the Board will considerwhat, if any, steps need to be taken to ensure that Ladbrokes Group employeeswho participate in the Employee Share Schemes will not be materiallydisadvantaged by any future return of cash to Shareholders. If necessary, theBoard will seek, at the earliest opportunity, the approval of Shareholders forany amendments required to the rules of the Employee Share Schemes or any otherarrangements which need to be implemented. The Board is currently considering whether it will be necessary to make anychanges to the way in which the Employee Share Schemes are operated afterCompletion to reflect the effect of the Disposal on the Ladbrokes Group. If anychanges are to be made which require Shareholder approval, such approval will besought at the earliest opportunity. 15. Taxation The Disposal is not expected to result in any material tax cost to the Company.HHC has effectively agreed to indemnify the Sellers as regards certaincorporation tax liabilities as will be described in the Circular. The Ladbrokes Group will be primarily a UK group and it is therefore likelythat, following Completion, its effective tax rate will be in the range of 25 to30%. 16. Expected Timetable 2006 Posting of Circular by 4 January Lastest time and date for receipt of completed 11a.m. on 25 January Forms of Proxy(1) for the EGM Extraordinary General Meeting 11a.m. on 27 January Completion of the Disposal(2) First quarter 2006 (1) Applicable also to online forms of proxy and CREST proxy instructions (2) This date is indicative only and will depend on, among other things, thedate the conditions to the Disposal are satisfied or waived. References to all times in this document are to GMT. Each of the times and dates in the above timetable is subject to change. If anyof the above times and/or dates change, the revised times and/or dates will benotified to Shareholders by announcement on a Regulatory Information Service. Definitions ''1978 Scheme'' the Hilton Group 1978 Share Option Scheme. ''Associated Contracts'' all the rights, title and interests of Town & County Factors Limited in the management agreements in relation to the Port SudanHilton and the Khartoum Hilton. ''Board'' the board of Directors of the Company. ''City Code'' the City Code on Takeovers and Mergers. ''Company'' Hilton Group plc. ''Completion'' the completion of the Disposal in accordance with the terms ofthe Disposal Agreement. ''Convertible Bonds'' means convertible bonds issued under the trust deed dated2 October 2003 constituting 3.375% guaranteed convertible bonds. ''Deferred Bonus Plan'' the Hilton Group Executive Deferred Bonus Plan -Conditional Share Plan. ''Deutsche Bank AG'' a corporation domiciled in Frankfurt am Main, Germany,operating in the United Kingdom under branch registration number BR000005,acting through its London Branch at Winchester House, 1 Great Winchester Street,London EC2N 2DB. ''Directors'' Sir Ian Robinson, David Michels, Brian Wallace, Christopher Bell,Ian Carter, Nicholas Jones, Ian Livingston, L.Patrick Lupo, ChristopherRodrigues and C. Pippa Wicks ''Disposal'' the proposed disposal of the Hilton International Hotels Division,including substantially the whole of the Group's hotel, timeshare, health clubsand related businesses by means of a sale of the entire share capital of Luxcoand LHUSA and the transfer of the Associated Contracts in each case pursuant tothe Disposal Agreement. ''Disposal Agreement'' the conditional agreement dated 29 December 2005 betweenthe Company, the Sellers and HHC. ''EBIT'' earnings before interest and taxes. ''EBITDA'' earnings before interest, taxes, depreciation and amortisation. ''EGM'' or ''Extraordinary General Meeting'' the extraordinary general meetingof the Company to be convened for 11a.m. on or about 27 January 2006 at TheLondon Hilton on Park Lane, 22 Park Lane, London W1K 1BE, and any adjournmentthereof. ''Employee Share Schemes'' the 1978 Scheme, the International Scheme, thePerformance Share Plan, the Sharesave Scheme, the Deferred Bonus Plan, theMatching Shares Plan, the Stakis Scheme and the SIP. ''Form of Proxy'' the form of proxy accompanying this document for use byShareholders in connection with the Extraordinary General Meeting. ''Group'' the Company and its subsidiaries and subsidiary undertakings. ''Hilton Group Pension Plan'' the pension plan governed by main edition rulesand special edition rules made on 31 December 2004 (as amended). ''Hilton International'' Hilton International Corporation. ''Hilton International Hotels Division'' the Target Entities and thesubsidiaries and subsidiary undertakings of each of them and the AssociatedContracts. ''HHC'' Hilton Hotels Corporation. ''IAS 19'' International Accounting Standard 19. ''Independent Directors'' the Directors excluding David Michels, Brian Wallaceand Ian Carter. ''International Scheme'' the Hilton Group International Share Option Scheme. ''Ladbrokes'' the betting and gaming division of the Group. ''Ladbrokes Group'' the Group excluding the Hilton International HotelsDivision. ''LHUSA'' Ladbroke Hotels USA Corporation. ''Listing Rules'' the listing rules of the UK Listing Authority. ''London Stock Exchange'' the London Stock Exchange plc. ''Luxco'' Ladbroke Group International Luxembourg S.A. ''Matching Shares Plan'' the Hilton Group Executive Bonus Plan - Matching SharesPlan. ''Ordinary Shares'' ordinary shares of 10 pence each in the capital of theCompany. ''Performance Share Plan'' the Hilton Group Performance Share Plan. ''Regulations'' the Uncertificated Securities Regulations 2001 (SI 2001/3755)(as amended). ''Remuneration Committee'' the remuneration committee of the Board. ''Regulatory Information Service'' has the meaning given in the Listing Rules. ''Sellers'' Ladbroke Group International Limited and Ladbroke Group Limited ''Shareholder(s)'' holder(s) of Ordinary Shares. ''Shares'' the entire issued share capital of Luxco and any issued shares ofLHUSA which are not owned by Luxco at Completion. ''Sharesave Scheme'' the Hilton Group 1983 Savings Related Share Option Scheme. ''SIP'' the Hilton Group plc Share Incentive Plan. ''Stakis Scheme'' the Stakis plc 1994 Executive Share Option Scheme. ''Takeover Panel'' the panel on takeovers and mergers which issues andadministers the City Code. ''Target Entities'' Luxco and LHUSA. ''Tindall Partnership'' the partnership constituted by the restated limitedpartnership agreement dated 30 August 2002. ''UK Listing Authority'' the Financial Services Authority acting in its capacityas the competent authority for the purposes of Part VI of the Financial Servicesand Markets Act. ''United Kingdom'' or ''UK'' the United Kingdom of Great Britain and NorthernIreland. ''United States'' or ''US'' the United States of America, its territories andpossessions, any state of the United States, the District of Columbia and allother areas subject to its jurisdiction. ''VAT'' value added tax chargeable pursuant to the Value Added Tax Act 1994 andlegislation (whether delegated or otherwise) supplemental thereto. ''Warranties'' the representations and warranties given by the Sellers to HHC inthe Disposal Agreement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ladbrokes Coral