1. Why might Bollenbach have opened his bid for ITT at $55 a share? What was his likely strategy? The $55 value is in the lower range of analysts' estimates, with a best estimate of $67.94. Since the stock had been trading below $45 for 4 months, the $55 offer represented a 29% premium to investors. Bollenbach knew that management would resist any acquisition attempt, regardless of price, due to previous failed attempts to negotiate an amicable merger in late 1996. The $55 benchmark created an expectation for ITT management to achieve that level, or higher and the premium is enough to demonstrate to investors that it is a real offering. Their support will be crucial as they vote to decide the fate of the poison pill provisions that will need to be removed to make the deal necessary. As the deal progresses, Hilton has plenty of room to negotiate with investors because their best-estimated value of ITT's operations is still 20% higher than their initial offer. By starting with a low offer, Hilton could risk another competitor entering the bidding, but their market analysis shows no such competition for such a large deal. Since Hilton still has the option to submit a higher bid later and has a 5% stake in the company that would benefit from such competition, Hilton's low bid says they are not afraid of such a situation . The original offering was well received on Wall Street, but not by ITT's entrenched management. In an unlikely scenario, the bidding company's stock price actually increased by 10% as this acquisition made so much sense for Hilton. The offering was made in January, when ITT's stock price was around $43.2. Why Bollenbach...... half of the document ......nt lies In investors, Bollenback should directly address the shareholders of the upcoming situation. It would be important to make sure they know that management's incentives are not necessarily the same as theirs, as can be seen from the lack of executive ownership at ITT. Investors should be aware of the random changes that management has made lately to improve their stock price. ITT management cited shareholder interests and those of ITT employees as a reason for not accepting an offer, but recently cut 125 jobs, more than half of its headquarters. Hilton has a plan to increase shareholder value through improved capital structure, improved cash flows and synergistic cuts. Additionally, they should be aware of the decision window of opportunity created by aligning management's final terms, as well as any other timing issues.