Hilton to unlock value

SEATTLE: Hilton Worldwide Holdings Inc said it would spin off its lodging properties and timeshare business into separate publicly traded companies in a bid to boost shareholder value as the world’s largest hotel operator faces increased competition.

About 70 of the company’s 146 owned and leased properties – mainly the US hotels – will be spun off into a real estate investment trust, chief executive officer Christopher Nassetta said on a conference call last Friday.

Overseas leased hotels would remain with Hilton, he said. Details of both the REIT and timeshare spinoffs would be provided in registration statements to be filed with the Securities and Exchange Commission in the second quarter, Hilton said in a statement.

Hilton’s owned and leased properties are valued at US$13.5bil, with 10 hotels generating half of that group’s pre-tax earnings, according to David Loeb, an analyst at Robert W. Baird & Co.

He estimates the new REIT will hold eight of the top 10, the largest of which is the Hilton Hawaiian Village Beach Resort & Spa in Honolulu.

Loeb estimates the timeshare company would be valued at about US$2.1bil.

The spinoffs would help Hilton increase shareholder value as rival Marriott International Inc becomes the No. 1 hotel operator worldwide when it acquires Starwood Hotels & Resorts Worldwide Inc, a deal set for completion mid-year.

Hilton is following a blueprint laid out by Marriott, which separated its hotel real estate into a new entity in 1993. That company, which became Host Hotels & Resorts Inc, converted to a REIT in 1999, and its timeshare business, Marriott Vacations Worldwide Corp, has a stock-market value of US$1.76bil.

“By simplifying our business, each segment should benefit from a dedicated management team with the capital and resources available to take advantage of both organic and inorganic growth opportunities,” Nassetta said on the call.

“It will also allow investors to more effectively allocate capital towards businesses more aligned with their objectives.” – Bloomberg

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