In a move that positions ITT Corp. as a major player in the gambling industry, ITT said yesterday that it had signed an agreement to acquire Caesars World for about $1.7 billion.
ITT, which owns the Sheraton hotels, entered the gambling industry last year by paying Kirk Kerkorian $160 million for the Desert Inn Hotel and Casino in Las Vegas. The acquisition of Caesars World would give ITT one of the premier names in the gaming industry and the opportunity to expand gambling in hotels around the world.
"When you combine the Caesar name with the Sheraton reservation system," said John J. Rohs, an analyst with Wertheim Schroder, "you're able to put lots of heads in beds, and in beds that are on top of casinos."
ITT offered $67.50 a share for Caesars' stock, a 49 percent premium over its closing price Friday of $45.25 a share. Caesars' shares soared more than $20 yesterday on volume surpassing 7 million shares, closing at $65.875 on the New York Stock Exchange. ITT shares closed at $81.50, down 37.5 cents. A cash tender for all Caesars' 25.1 million shares of common stock outstanding will begin by Friday.
ITT, which had net income of $913 million last year on revenue of $22.76 billion, owns or operates more than 450 Sheraton hotels worldwide. It owns Hartford Insurance and ITT Industries, which manufactures automotive, military and electronics products. It also owns a riverboat casino in Tunica, Miss., and operates casinos in Egypt, the Dutch Antilles and Australia.
Earlier this year ITT announced that it and Cablevision Systems would purchase Madison Square Garden for $1.08 billion, a move questioned by several analysts.
"I had downgraded ITT stock when they bought Madison Square Garden because it reopened the question of 'What's its core business?' " said Jack Modzelewski of PaineWebber. "It can still probably be asked what does ITT want to be when it grows up. But the Caesars acquisition pretty well completes the picture; now they probably don't need any more acquisitions."
Caesars World, based in Los Angeles, owns and operates casinos in Las Vegas, Atlantic City and Lake Tahoe, and with two other partners it manages a casino owned by the province government of Ontario.
It also operates a casino aboard the Crystal Harmony cruise ship and has four nongambling resorts in the Pocono Mountains of Pennsylvania. In the fiscal year that ended July 31, Caesars had earnings of $78.3 million on revenue of almost $1.02 billion.
"ITT already has one of the highest name recognitions in the world, and Caesars is No. 1 in the world in dealing with high rollers," said M. L. Smith, professor of hotel management at the University of Nevada at Las Vegas.
"Both are strong, profitable companies with reputations for integrity, and combined they will give tremendous momentum to gaming."
The ITT Sheraton-Caesars combination is sure to expand worldwide, analysts said, as both companies have vast international experience. "Caesars has marketing offices across the world," Mr. Rohs said, "and 15 percent of the business that comes into Las Vegas is international gamblers."
Jim Gallagher, a spokesman for ITT, acknowledged that the company was considering global expansion. "We're looking at just about every opportunity that comes up," he said.
ITT said the transaction, which is subject to regulatory approval, would not dilute its stock and was expected to contribute to earnings in the first year.