STAMFORD, CT—Starwood Hotels & Resorts Worldwide, Inc. plans to spin-off its vacation ownership business, Starwood Vacation Ownership (SVO), into a separate publicly traded company.
In addition to accelerating Starwood’s ongoing asset-light transformation, the transaction will create a new pure-play vacation ownership company with a seasoned management team and a strong balance sheet to take advantage of increasing growth opportunities within the timeshare industry, according to the company. The transaction, which is expected to be tax-free to Starwood shareholders, will be effected through a pro rata distribution of the new entity’s stock to existing Starwood shareholders.
SVO reported vacation ownership revenues of approximately $640 million in 2014 and has sold more than $6 billion of vacation ownership intervals to over 220,000 owners over its 30-plus year history.
As part of the planned spin-off, the new company will develop and operate SVO’s 22 timeshare resorts; continue to expand its existing developments within its current portfolio; benefit from additional anticipated inventory at Westin Los Cabos, Westin Cancun, Westin Puerto Vallarta, Sheraton Kauai, and Sheraton Steamboat – owned properties Starwood expects to transfer to the new entity for future timeshare development; and enter into a new long-term license agreement with Starwood for current and future timeshare properties to retain affiliation with the Westin and Sheraton brands. Owners will continue to have access to the Starwood Preferred Guest (SPG) program.
The company will continue to be headquartered in Orlando.
“This is the right time for us to spin-off our vacation ownership business and move Starwood forward in its asset light strategy. Not only does SVO continue to have a great outlook for growth, but valuations for timeshare companies are at attractive levels,” said Frits van Paasschen, president and CEO of Starwood. “Separating this distinct part of our business will allow Starwood to continue participating in this growth industry through a fee-based business model, as we do with our managed and franchised hotel business. This transaction puts us in a position to build on the strength of our brands to fuel growth and create shareholder value for both companies.”
Matthew Avril, who retired as president of Starwood’s Hotel Group in 2012, will return to lead the new company as CEO following completion of the spin-off. Stephen Williams will continue to serve as COO.
The name of the new company will be determined in the coming months. The transaction is subject to the receipt of normal and customary regulatory approvals, the execution of inter-company agreements, arrangement of adequate financing facilities, the effectiveness of the registration statement, final approval by Starwood’s board of directors, and other customary conditions. The spin-off transaction will not require a shareholder vote. The spin-off is expected to be completed by year-end but there can be no assurance regarding the ultimate timing of the spin-off or that the spin-off will ultimately occur, according to the company.