Wyndham Worldwide has announced plans to spin off the company’s hotel business resulting in two separate, publicly traded companies. Wyndham Hotel Group, with headquarters in Parsippany, New Jersey, will become a new, publicly traded pure-play hotel company. Wyndham Vacation Ownership, with headquarters in Orlando, Florida, will become a publicly traded timeshare company and will be joined with Wyndham Destination Network, home to RCI, a timeshare exchange company. The company will also explore strategic alternatives for its European rental brands.
The two public companies intend to enter into long-term exclusive license agreements to retain their affiliation to the Wyndham Rewards loyalty program, as well as continued collaboration on key inventory sharing and customer cross-sell initiatives. The corporate names of the post-spin public companies have not yet been decided.
The transaction is intended to help both companies maintain sharper focuses on their core businesses and growth opportunities, facilitate future capital raising as needed, and become more nimble in response to market developments.
C. Patrick Scholes, analyst with SunTrust Robinson Humphrey said in his note following the announcement that separating the businesses will allow Wyndham Hotel Group to return to its roots as a roll up story.
The problems Scholes sees this solving:
- Large scale lodging M&A was not accretive with Wyndham’s blended multiple – the math may work better post spin
- Timeshare M&A was unattractive, as Wyndham risked being ascribed a pure timeshare multiple – most of the timeshare assets that are out there are in the unbranded space, where Wyndham plays
Scholes added that the key remaining question is how the new timeshare business will be capitalized? “Generally speaking, timeshare companies only have a couple of turns of corporate debt, maximum,” he said.
Geoff Ballotti, current CEO of Wyndham Hotel Group, will continue to lead the hotel company as president and CEO. Michael Brown, current CEO of Wyndham Vacation Ownership, will continue to lead the timeshare company. Gail Mandel, CEO of Wyndham Destination Network, will continue to lead that business through this transition, and Tom Conforti, CFO of Wyndham Worldwide, will move into an advisory role, working with the company through the transaction. David Wyshner will assume the role of Wyndham Worldwide CFO and will become CFO of the hotel company upon spin.