Hilton negotiating merger to fly corporate flag across the globe.

IF analysts and stockholders were taken off guard by news that Hilton Hotels Corp. was in talks to buy Hilton Group PLC's international hotels, they can blame Stephen Bollenbach.

In June, the Hilton Hotels chief executive told the Financial Times he didn't foresee a merger or takeover until after he retired in December 2007. Beverly Hills-based Hilton Hotels spun off the international lodging unit in 1964.

"It may be a long time coming because we do such a good job of working together now," Bollenbach was quoted as saying in the Financial Times. "They are too big for us to buy and we're too big for them to buy."

But last week Hilton Hotels confirmed that the company was engaged in discussions with the London-based Hilton Group regarding an acquisition.

Hilton Hotels and the Hilton Group are keeping mum while negotiations continue. But there's speculation that an all-cash deal could be worth $6.3 billion. Judging by Hilton Hotel's stock, U.S. investors didn't welcome the news. Last Tuesday, the company's shares dipped to $19.16 from over $21 five days earlier.

Robert LaFleur, a lodging and leisure industry analyst with Susquehanna Financial Group LLP, said stockholders were surprised by the shift in Hilton Hotels' corporate strategy. Under Bollenbach's watch, the company has been moving to increase the number of its franchises and sell key corporate-owned hotel properties. It also has been buying back stock.

Earlier this year, the company announced that it would buy back as many as 50 million shares of Hilton stock, helping drive up the stock price. Any large acquisition would leave little left for such big share purchases.

Hilton Hotels' corporate strategy dates to 1997 when the company struck an agreement with the London-based group, which owns more than 400 hotels in 80 countries. The two sides agreed to do some mutual marketing, while Hilton Hotels agreed not to pursue any overseas expansion.

Joseph Greff, an analyst with Bear Stearns Cos., said in a research note that Hilton Hotels "needs to address why it thinks now is the right time to make an acquisition--is it because it sees domestic growth slowing in the near term?"

Both Greff and LaFleur said that the Hilton Group takeover could have long-term benefits. Hilton Group would give Hilton Hotels a global presence to match competitors Starwood Hotels & Resorts Worldwide Inc. and Marriott International Inc., which have been opening hotels in Europe and Asia as room rates have finally risen worldwide after the tech bust and the post 9/11 worldwide travel slowdown.

Caloric Intake

Open Menu Inc. has discovered a dirty little secret of health-conscious Angelenos: They crave calorie-packed Southern comfort food.

"You'd think they would be eating tofu," said Robert Benson, president of Open Menu, the outfit behind Jack n' Jills eateries in Beverly Hills and Santa Monica. "There is an undercurrent of people who don't want to admit it, but they want to go out and have some real food."

At Jack n' Jills, country-fried steak, frosted cupcakes and syrupy pancakes are popular. Besides the recently opened Santa Monica location, the company wants to open 25 more locations across California, Arizona and Oregon.

Most of the locations will be less than half the size of the 2,700-square-foot Beverly Hills location and won't offer full sit-down service. Benson said the smaller eateries typically cost $250,000 to start up, and it takes about 292 years to recoup the initial investment.

Quota Setback

Local apparel makers waiting for U.S. and Chinese government officials to settle their differences on textile quotas will have to wait longer.

A fourth round of talks has ended without a resolution, although U.S. officials maintained that they were getting closer to reaching a settlement with China.

"We had a very generous proposal for the Chinese but it was not generous enough for them," Rob Portman, the U.S. Trade Representative, told reporters.

The talks involve an agreement that would govern clothing and textile trade until the end of 2008, when safeguards on certain apparel categories would expire. Chinese officials want new quotas to increase 30 percent in 2008, while U.S. officials want increases to be capped at 14 percent.

Staff reporter Rachel Brown can be reached at [phone], ext. 224, or by e-mail at [e-mail].