Hilton Board Greenlights Separation of Businesses

By Barbra Murray, Contributing Editor

Sunrise Lodge, Park City, Utah, courtesy of Hilton Grand Vacations

McLean, Va.—Hilton Worldwide Holdings has taken a big step forward in its ongoing asset-light, capital-light strategy. The global hospitality company recently secured the green light from its Board of Directors to spin-off its Hilton Grand Vacations Inc. timeshare division and Park Hotels & Resorts Inc. into two independent companies.

“The pending spins of our timeshare and real estate businesses are the latest and arguably the most complex value creation efforts we’ve undertaken to date,” Christopher Nassetta, president & CEO of Hilton Worldwide Holdings, said during the company’s second quarter 2016 earnings call on July 27. “We think all three companies will be uniquely positioned to capitalize on value-enhancing opportunities in their respective businesses.”

The Board took additional steps, including the signing off on a 1-for-3 reverse stock split for Hilton. The Board also approved the distribution of one share of Hilton Grand Vacations common stock for each 10 shares of Hilton common, and one share of Park common stock for each five shares of Hilton common stock. Wells Fargo Bank, N.A. will act as the distribution agent, transfer agent, and registrar for the shares of all three entities. When all is said and done, Hilton, Hilton Grand Vacations and Park Hotels will take on the following respective identities: an industry-leading fee business; a fast-growing, capital-efficient timeshare business; and a company holding premium assets with a scaled platform and strong growth potential.

Harbourview Villas at South Seas Island Resort, Captiva Island, Fla., courtesy of Hilton Grand Vacations

Many analysts give the plan the thumbs-up. “We view Hilton’s intention to spin-off its owned real estate and timeshare business positively, as we expect the spin-offs will create long-term value,” analysts with financial services firm R.W. Baird & Co. wrote in a note following Hilton’s announcement of the plan in February. The fruits of the separation, however, may not be realized immediately. In another note issued in late October, the Baird team remarked, “While we believe Hilton remains undervalued on a sum-of-the-parts basis, we expect the stock could be somewhat range bound until the spin-offs occur as investors might wait to put new money to work until they can buy Hilton’s asset-light, fee-based business post-spin-offs.”

The spin-offs of Hilton Grand Vacations and Park Hotels are scheduled to reach completion Jan. 3, 2017, at which point the companies will commence trading on the NYSE with the respective ticker symbols of HGV and PK.

Hilton declined to offer any further comment in advance of the company’s investor day on Dec. 8.