Hilton to double European hotels presence with pounds 612m Scandic

HILTON, the UK leisure giant, is set to double its European hotel operations by acquiring Sweden's Scandic Hotels for pounds 612m in cash and shares.

Hilton, which owns the Ladbrokes betting chain as well as the upmarket Hilton brand outside the United States, has made an agreed offer for Scandic's 154 hotels. If the deal goes ahead, it will take Hilton's total portfolio to around 390, and will double the number of its hotel beds in continental Europe.

The announcement came as Hilton reported a 27 per cent jump in hotel profits for the first quarter, led by strong European trading. Betting profits rose 30 per cent in the period, but shares in Hilton ended down just 0.75p at 219.75p on fears that the foot-and-mouth crisis and the US economic downturn could have an adverse impact over the next few months.

Commenting on the Scandic deal, Hilton's chief executive, David Michels, said: "We've been talking to lots of people for a long time. I'd be lying if I said this was our number one choice." He said Scandic was one of four potential targets the company had identified. He would not comment on the other three but analysts speculated that the list could have included Swissotel Hotels & resorts, which was sold by the loss-making SAirGroup to Raffles of Singapore for S$439m (pounds 168m) yesterday.

Mr Michels dismissed persistent speculation that Hilton is lining up a disposal of its Ladbrokes chain in order to focus on hospitality. The betting division performed better than expectations in the first quarter, despite a run of horseracing cancellations due to the foot-and-mouth outbreak.

Margins improved as an unusually high number of outsiders romped to victory in sporting events. Meanwhile, Ladbrokes' eGaming arm helped boost earnings by turning in a profit nine months ahead of target. On the hotels side, Mr Michels said the UK business had been "very resilient" in the three- months ended 31 March. But he warned: "I don't think that should be taken as a forecast for Q2."

He said the beginning of the year was traditionally focused on business visitors, with many of Hilton's major conferences taking place in the period. Meanwhile, the second and third quarters are more dependent on tourism. Mr Michels said: "I can't believe that in the second quarter we won't see less American visitors. That must have some kind of negative impact."

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