Hilton Plans to Spin off Real Estate and Timeshare Businesses

MCLEAN, VA—Hilton Worldwide said it plans to spin off the bulk of its real estate business into a publicly traded real estate investment trust (REIT) and spin off its timeshare business, Hilton Grand Vacations (HGV), as a separate publicly traded company.

“The transactions will result in three pure-play companies, enabling dedicated management teams to fully activate their respective businesses, taking advantage of both organic and inorganic growth opportunities as well as capital market and tax efficiencies,” said Christopher J. Nassetta, president & CEO of Hilton Worldwide. “We intend to have the appropriate leadership, strategies and capital structures in place to set up all three companies for further success.”

According to Hilton Worldwide, it has received a private letter ruling from the Internal Revenue Service on certain issues relevant to the qualification of the spin-offs as tax-free. These transactions will be effected through a distribution of the new entities’ stock to existing Hilton Worldwide shareholders. The intention is to file appropriate registration statements with the Securities and Exchange Commission (SEC) during the second quarter and to complete both spin-offs by the end of the year.

Hilton Worldwide intends to elect REIT status for the newly formed real estate company, which will include approximately 70 properties and 35,000 rooms, forming one of the largest and most geographically diversified publicly traded lodging REITs. According to the company, the REIT will have a high-quality portfolio of luxury and upper-upscale assets, located across high barrier to entry urban and convention markets, top resort destinations, select international regions and strategic airport locations.

Hilton Worldwide expects the newly formed timeshare company to manage nearly 50 club resorts in the U.S. and Europe, and have an exclusive, long-term license agreement with Hilton Worldwide to market, sell and operate resorts under the Hilton Grand Vacations brand.

Hilton Worldwide will disclose more details of the proposed timeshare and real estate transactions upon the filing of appropriate registration statements with the SEC, including financial and other details. The transactions are subject to execution of intercompany agreements, arrangement of adequate financing facilities, the effectiveness of the registration statements, final approval by Hilton Worldwide’s board of directors and other customary conditions. The spin-off transactions will not require a shareholder vote. The spin-offs are expected to be completed by year-end but there can be no assurance regarding the ultimate timing of the spin-offs or that either or both of the spin-offs will ultimately occur.

Deutsche Bank Securities Inc. and Goldman, Sachs & Co. are acting as financial advisors to the company.