Vistana Timeshare Spinoff Still On Despite Marriott Purchase Of Starwood Hotels

Last month, we reported speculation that Starwood Hotels(HOT) would be acquired by one of three Chinese hoteliers or Hyatt Hotels(H).  An acquisition was indeed in the offing, but by a company unmentioned in those previous reports- Marriott International(MAR). Marriott announced yesterday that it would be acquiring Starwood for $12.2 billion. Not to worry, spinoff fans. Starwood’s spinoff of its Vistana timeshare business in a reverse Morris Trust merger is still on.

Starwood shareholders will separately receive consideration from the spin-off of the Starwood timeshare business and subsequent merger with Interval Leisure Group, which has an estimated value of approximately $1.3 billion to Starwood shareholders or approximately $7.80 per Starwood share, based on the 20-day VWAP of Interval Leisure Group stock ending November 13, 2015. The timeshare transaction should close prior to the Marriott-Starwood merger closing.

There is no timeline yet for completion. This deal has evolved dramatically over time. It was first announced as a pure spinoff of Vistana. Then, last month, it became a reverse Morris Trust transaction with Interval Leisure Group(IILG). Now, the rest of the company will be sold, but the spinoff remains intact. Credit card rewards fans, who have long loved Starwood’s generous rewards program, are already bracing for its end, as the program is likely to end with the transaction. This would also be another blow for American Express(AXP), the issuer of the Starwood loyalty card, which has already lost partners Costco(COST) and JetBlue(JBLU) this year.

Disclosure: The author owns shares of American Express and Costco