Inside Hilton’s REIT, timeshare spinoff plans

On Friday of last week, Hilton confirmed rumors about spinning some of it’s business units into a separate company. Hilton will will form and new REIT and a new timeshare company. Hotel News Now details what’s in store for Hilton’s new entity’s.

By: Hotel News Now/Stephanie Ricca
Published: February, 2016

MCLEAN, Virginia—Talk has been floating for the last year about the possibility of Hilton Worldwide Holdings spinning off some of its business units, and the company confirmed the rumors on Friday. 

The company announced plans to spin off much of its real estate into a publicly traded real estate investment trust; and its timeshare business, Hilton Grand Vacations, into a separate publicly traded company. 
Hilton Worldwide President and CEO Chris Nassetta said Friday morning during the company’s quarterly earnings call with analysts that he looks at the spinoff process as a way to excel in many areas of the business. 
“The reason (for doing this) is to have dedicated management teams for each, and dedicated investor bases,” he said. “It will create cost-to-capital and tax efficiencies, and last but not least, we’re doing this to be able to activate all three businesses fully. That means both organic and inorganic growth. That includes inorganic opportunities, and (these companies) will have the capability to pursue those.” 
Regulatory compliance processes are underway for both spinoffs, and the company intends to file registration statements with the Securities and Exchange Commission during the second quarter and to complete both spinoffs by the end of the year. The transactions are subject to customary conditions, including final approval by Hilton’s board of directors. 
The company did confirm in a news release that it has received a private letter ruling from the Internal Revenue Service “on certain issues relevant to the qualification of the spinoffs as tax-free.” 
Hilton Worldwide’s largest stakeholder, Blackstone Group, owns about 45% of the company, and Nassetta confirmed that Blackstone would not need to sell down in order for the spinoff transactions to occur.
In terms of leadership, Nassetta said Hilton Grand Vacations President Mark Wang will serve as CEO of the new timeshare business, and the company is still considering leadership options—both internally and externally—for the REIT business. 
As of press time, Hilton’s stock price was up 0.4% to $20.41. To read the entire article,click here.