The transaction will give Hilton, the third-largest U.S. lodging company, about 280 hotels in Europe and 80 in Asia and the Middle East, helping it compete with Marriott International Inc. and Starwood Hotels & Resorts Worldwide Inc. It will also allow the company to expand brands including Doubletree, Embassy Suites, Hampton Inn and Conrad abroad.

Hilton "needs to get in balance with Starwood and Marriott, which have a higher concentration of their hotels internationally and are better diversified for when one area may be weak," said Sam Lieber, chief executive officer of Purchase, N.Y.-based Alpine Management & Research LLC, which owns 2.3 million Hilton shares among $3.1 billion in assets.

Shares of Hilton Group surged 4.25 pence, or 1.2 percent, to a record 368.75 pence in London. They have climbed 30 percent this year. Hilton Hotels jumped $1.70, or 7.6 percent, to $24 in New York Stock Exchange composite trading, the biggest gain in almost three years. They've increased 5.5 percent this year.

The two lodging companies had combined revenue of $7.2 billion last year. By that measure, the purchase will make Hilton Hotels the second-largest U.S. hotelier. Marriott had 2004 revenue of $10.1 billion and about 2,700 properties. Starwood had revenue of $5.37 billion and about 850 properties.

Hilton Hotels officials said on a conference call with analysts that 2006 sales will be $8.14 billion assuming it owns the new properties for the full calendar year.

The company is making the purchase as the lodging industry benefits from a rise in business and leisure travel in the United States and tourism is rebounding in the United Kingdom after the July terrorist attacks. Hilton Hotels lifted rates an average of 8.9 percent in the third quarter in markets including New York. Hilton Group increased rates about 8.8 percent in October as London's hotel business picked up.

Hilton Hotels CEO Stephen Bollenbach said Thursday he'll continue Hilton Group's program of selling assets to use proceeds to repay debt and focus the company on earning management and franchise fees.

Last quarter, increased occupancy and higher rates spurred a 10 percent increase in pretax adjusted profit, Hilton Group said in November. It put 18 U.K. and Irish properties up for sale in July amid rising demand, after announcing plans in February to raise as much as 400 million pounds from selling hotels.

Hilton Hotels is paying 11.3 times adjusted 2006 earnings before interest and taxes. The company said it will pay for the purchase with cash and a bank loan of $4.61 billion provided by Bank of America Corp. and UBS Securities LLC, the advisers on the deal. Hilton Hotels was also advised by Morgan Stanley. Deutsche Bank AG advised Hilton Group.