HILTON HAS ROOM FOR ITT

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Stephen Bollenbach, the high-flying CEO of Hilton Hotels Corp., is strictly a bird of his word. Bollenbach told TIME last summer that he was looking to make significant additions to Hilton's hotel holdings. Last week he found what he was looking for--more than 130,000 rooms. Those lodgings happen to do business under the banner of Sheraton, which happens to be owned by ITT Corp. and run by Rand Araskog, a man not keen on having his corporate masterwork painted over. That's why Hilton's $55-a-share, $6.5 billion offer for ITT, whose holdings also include the Caesars World chain of casinos and Madison Square Garden, is becoming the kind of delicious dogfight that Wall Street loves.

Bollenbach, 54, is one of the sharpest pencils in corporate America, a veteran hotelier who joined Hilton last year after a stint at Walt Disney Co., where he helped engineer the Mouse's $19 billion buyout of Capital Cities/ABC. Araskog, 65, has lots of starch in his sheets. A West Pointer who once served in the National Security Agency, he has a perfect record in fending off corporate raiders.

When Bollenbach fled the executive loony bin at Disney for Hilton last year, he quickly developed a new strategy for the well-known but mediocre company. In lodging, he wanted to expand Hilton's traditional presence in the full-service-hotel sector in the U.S. and abroad. In gaming, he saw Hilton as a buyer in an industry that was consolidating. To finance acquisitions, he would take advantage of low interest rates and Hilton's strong balance sheet.

ITT Corp. fits Bollenbach's bill perfectly. "Sheraton," he says, "has something that very few other people have: a large number of big hotels." His timing is pretty good too. Deluxe hotels are far cheaper to buy than to build, particularly in major cities such as New York and Chicago, which have added few big inns since an industry-wide slump ended in 1994. At the same time, the profits of hoteliers jumped 28% last year.

The Hilton/ITT combination would create the world's largest hotel-and-gaming company, with more than 650 hotels and 30 casinos from Las Vegas to Turkey to Uruguay. (Combined revenues: $8.5 billion, with ITT accounting for 77% of the total.) "This should be the merger of the century in the hotel-and-gaming industry," says Bjorn Hanson, chairman of the hospitality-industry practice at Coopers & Lybrand, an accounting and consulting firm.

If Bollenbach prevails, that is. Araskog greeted the offer with public silence and began privately assembling a defense team. He has run ITT since 1979 and seems primed for a big battle. "Sheraton would rather take over Hilton than be taken over by it," says Morris Lasky, ceo of Lodging Unlimited, a hotel-management and consulting firm. Lasky likened Hilton and ITT to "two titans that will go nose to nose." Just the prospect of such a fight sent ITT stock up a whopping $14.75 a share, to $58.50, the day Hilton launched its offer. (ITT shares closed Friday at $57.25, while Hilton stock ended at $28.50, up $2.75 for the week.) "The best thing for shareholders," Hanson says, "is that a deal doesn't happen in a nice, friendly way for a while."