Hutchison Whampoa, the Hong Kong trading giant that owns the 750-room hotel, is to buy Ladbroke out of its management contract for dollars 125m. The contract has 20 years to run and is worth dollars 6m a year.
A Ladbroke spokesman stressed that the deal was done at Hutchison's instigation. 'The hotel has been one of our best performers and Hutchison are paying us a vast amount of money for an asset that is not in our balance sheet.'
It is understood that Hutchison is keen to redevelop the site following the sharp rises in Hong Kong property prices. But Hilton will continue to manage the hotel until next year and is now looking for an alternative property to manage under the Hilton name.
Peter George, Ladbroke's chief executive, said the deal underlined the value of the Hilton name and would make a useful contribution to reducing the group's debt.
Hilton has received a non-refundable deposit of dollars 12.5m with the balance to be paid on termination of the contract, which will take place no later than 21 January next year. Hutchison will then take over management of the hotel while it reviews its options for the site. Hilton has managed the hotel since 1963.
Ladbroke also confirmed yesterday that it was appointing two new non-executive directors to the board. They are Hugh Collum, finance director of SmithKline Beecham, and Derek Williams, a director of Cadbury Schweppes.
They join as part of the reconstruction of the board initiated by the new chairman, John Jackson, in the wake of the departure of Cyril Stein. Their arrival will bring the number of non-executives on the board to six, including Mr Jackson.
Mr Jackson has been trying to rebuild confidence in the group, which has been damaged by poor recent results, high debt and concerns about corporate governance.