Smith Barney, the New York securities house, has been working on a strategic plan for Hilton Corp since just before Christmas. Leisure industry analysts calculate that the casino business, mainly located in and around Las Vegas, is worth about $1.59bn (£1bn) and the hotels almost $2.4bn.
A couple of the casinos are attached to some of the biggest hotels in the world. The Las Vegas Hilton has 3,174 rooms, and the Flamingo Hilton, also in Las Vegas, has 3,034. Most of the other main casino operations are also in Nevada, including the Reno Hilton and the Flamingo Reno Hilton. Hilton Corp has 291 hotels, of which only six are outside the Americas.
Ladbroke, which owns the rights to the Hilton name outside the US, declined to comment on the speculation. However, Peter George, the company's chief executive, said recently "there may be an opportunity for us to get involved in some way" if Hilton Corp was sold.
Any deal, though, is unlikely to involve Ladbroke buying the hotels outright, particularly because its balance sheet already sports more than £1bn of debts. The consensus in the City is that Ladbroke, which is valued at £2.15bn, will look to secure rights to manage the hotels via a joint venture with a real estate investor in the US.
Shares in Hilton Corp fell $2.75 to $75 in early dealings in New York amid disappointment over the plan. "They couldn't find a buyer for the whole company. It was a semi-rumoured takeover target that nobody wants," said one trader.
The break-up plan will be presented for the board's approval at a special meeting next month. Analysts, who had placed a takeover price of $80-$90 per share on Hilton as a single entity, said the shares could slip to $60 if the break-up is approved.