Hilton hotels disposal earns chief executive a £6m windfall

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Hilton Group's outgoing chief executive David Michels stands to make up to £6m from share options after the group finally clinched the long-awaited sale of its hotels arm to the US business Hilton Hotels for £3.3bn in cash yesterday.

The deal reunites Hilton's US and international hotels businesses after 41 years and turns Hilton into a pure betting business. The sale could herald the complete break-up of the group which has received at least three approaches from private-equity firms for the remaining Ladbrokes betting and gaming arm, which will inherit Hilton's London market listing.

Chris Bell, the head of Ladbrokes, will take over from Mr Michels when the deal completes at the end of February. A company spokesman said Mr Michels reckons he could make between £5m and £6m before tax from his share options. His deputy, Brian Wallace, is also set to make millions. Both will leave the board at completion of the deal but will stay on in consultancy-type roles under three-year contracts with HHC. Sir Ian Robin remains as chairman.

The two hotels businesses were split in 1964 to leave HHC focused on the US and Hilton to concentrate on other international markets. Sources had put the value of the deal at £3.6bn, but the company recently sold £400m of hotel assets. It will be renamed Ladbrokes when the deal is complete. Hilton said it would return a "substantial amount of cash" to shareholders as early as April.

The company said last week it had received approaches for Ladbrokes which are thought to have come from private-equity groups BC Partners, Blackstone and CVC Capital, and could value the business at between £3bn and £4bn.

Mr Michels said while the group had had "sensible discussions" with potential bidders, it was not talking to them any more because it wanted to concentrate on the hotels sale. Mr Bell reiterated he was focused on building Ladbrokes as an independent business.

The hotels sale clears the way for Ladbrokes to enter the lucrative US betting market. Only non-US companies based in offshore locations have been able to offer online gambling in the US. So far, Ladbrokes has been barred from entering the US market because Steve Bollenbach, the American chief executive of HHC, sat on the Hilton board. That hurdle was removed when he left the board recently.