After a busy Halloween, it is time to look ahead to the next spinoff opportunities. Luckily we won’t have to wait long as Marriott International’s (MAR) board of directors recently approved the spinoff of its vacation club, Marriott Vacations
Worldwide. The distribution is expected to take place on November 21st (to shareholders as of Nov 10th) and shareholders will receive 1 share of VAC for every 10 shares of MAR owned. For some background on the planned move, please see our earlier piece on Marriott here and a copy of the Form 10 is available here.
As a very brief recap, Marriott plans on separating its timeshare business, which has somehow been rebranded into the ‘Vacation Ownership’ business, into a standalone company. I guess people would rather own a vacation than a timeshare? The new company has 64 resorts throughout the world and ~400K ‘owners’ as of 12/31/10. The new company will pay licensing fees of ~$50m/year to Marriott International for using the name (and the Ritz-Carlton name). The Form 10 lists five reasons for pursuing the spinoff, namely:
- Enhanced strategic and management focus for each company
- More efficient capital allocation, direct access to capital and expanded growth opportunities for each company
- The ability to implement a tailored approach to recruiting and retaining employees at each company
- Improved investor understanding of the business strategy and operating results of each company
- Investor choice.
In other words – the usual stuff (now that would make for a fun SEC filing). The final slides of this presentation by COO Arne Sorenson offer a little insight as well into the spinoff.
The timeshare business has historically been volatile and can struggle during periods of economic malaise. As JW Marriott and Arne Sorenson, the company’s Chairman, CEO and COO, put it in their Annual Report’s Executive Letter, “timeshare demand correlates highly with consumer confidence.” So…’perfect’ timing based on this past month’s consumer confidence numbers. For additional analysis on the transaction, check out Long Term Value’s take here.
Disclosure: Author holds no position in any stock mentioned.