Hilton (HLT)	Starwood / ITT (HOT)
Cash	$80/Share for 55% $44/Share in Cash	$15/Share
Stock	2 shares HLT for 1 ITT, for the remaining 45%, or about $27.73 a share in stock. Plus, Contingent-Value Stock if HLT < $40/Share 1 year post-merger Max Payment: Cash or Stock of $12	$67 a share in Starwood stock so long as Starwood stock stays within $4 of $57.263
Closing	Cash Paid 1-2 Weeks Post-SH Vote Stock Portion 60-90 Days Thereafter	Moved Up to Jan-Feb From End of Q1
Synergies	$115M	$100M

Assume: Volatility = 40% for both Hilton and Starwood, r = 6%, PHLT = 31.81 (price on 10/31: $30.81; the text on the stock valuation of $27.73 refers to this price and can be ignored), PHOT = $52.10 (down from $54.25 on 10/31, and from $57.263 earlier). (HLT, HOT are the ticket symbols of Hilton and Starwood, respectively). PHLT and PHOT are after the transaction is announced. They incorporate the information about the value of the transaction including the value of the expected synergy and of the derivatives offered. No dividend is paid on these stocks. Assume that ITT SH vote is expected 20 days from now. If Starwoods offer is supported, the deal will be completed 60 days after that, and on that day Starwood will pay for the deal. If Hiltons offer is supported, the merger will completed 10 days after the SH vote. Then, the cash part is paid and the day count begins for the contingent value stock. The Hilton stock portion + one contingent value stock against each share of Hilton will be paid 60 days after the cash is paid. The year has 365 days. Assume for simplicity that for each bidder, the transaction is certain to go through. Use post-announcement prices. Assume no transaction costs. Calculate the value of each offer.