Bollenbach's Rewards Program

When Hilton Hotels C.E.O. Stephen Bollenbach checks out, the front desk will have a nice rebate for him.

The hotel chain's chief executive, who plans to retire as soon as the sale of Hilton to Blackstone Group is complete, will walk away with about $135 million in cash and stock, according to the terms of his compensation agreement laid out in a new regulatory filing.

On July 3rd, Blackstone announced plans to buy Hilton for $20 billion. The $47.50 per share price was a 40 percent premium to the previous day's close.

But on July 5, the first of 12 shareholder suits were filed against Hilton, and in some cases Blackstone. According to today's S.E.C. filing, shareholders allege that the company breached its fiduciary duty by agreeing to the merger, and it failed to negotiate fair and favorable terms.

Now, it's hard to argue that $135 million isn't an excessive pay package. It certainly is.

But Bollenbach, according to the filing, did not simply take Blackstone's first offer and run. When an unnamed private equity firm first approached him in June of 2006 with an offer in the low $30s per share, Bollenbach said no.

When Blackstone entered the picture and offered a price in the high $30s in September, Bollenbach again said no.

Many months later, in May of this year, Blackstone came knocking again, with an offer in the low $40s. Bollenbach, along with the board and financial advisors, asked for $48, and eventually agreed on $47.50.

And shareholders might want to consider the fact that, if the deal gets done, Blackstone will pay them more money per share than they can find on the open market today. Shares of Hilton Hotels are currently trading at about 8 percent lower than the offer price of $47.50.

Of course, investors have every reason to be nervous about the fate of the deal. In just a few short weeks since the takeover was announced, the credit markets have deteriorated considerably. Several buyout firms have had difficulty in finding investors for the debt necessary to close to deals.

And another thing has happened since the hotel buyout was announced that might worry some shareholders of takeover targets like Hilton. Blackstone Group shares have dropped 21 percent from its June I.P.O. price. As of today, that makes it the worst performing I.P.O. this year.

by Megan Barnett

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