VAC/ILG shareholder activism speculation [THREAD CLOSED]

[BigMac]

Hot off the press. Marriott Vacations has made a bid for ILG at $30/share. ILG share price immediately spiked almost 7%
https://seekingalpha.com/news/3299136-ilg-spikes-report-marriott-vacations-interest

 

[GregT]

Hot off the press. Marriott Vacations has made a bid for ILG at $30/share. ILG share price immediately spiked almost 7%
https://seekingalpha.com/news/3299136-ilg-spikes-report-marriott-vacations-interest

That is unexpected. I was under the impression that either Starwood or Hyatt (or both) had restrictive clauses in their agreements with ILG that impacted the ability for ILG to get acquired by a competing hotel brand. Interesting, will see what happens.

Best,

Greg

 

[Xpat]

Hot off the press. Marriott Vacations has made a bid for ILG at $30/share. ILG share price immediately spiked almost 7%
https://seekingalpha.com/news/3299136-ilg-spikes-report-marriott-vacations-interest

Interesting, if it's true I don't think it was meant to leak 30 minutes before market close. VAC actually rose on the news, so Wall Street must think the acquisition terms are good for Marriott Vacations.

That is unexpected. I was under the impression that either Starwood or Hyatt (or both) had restrictive clauses in their agreements with ILG that impacted the ability for ILG to get acquired by a competing hotel brand. Interesting, will see what happens.

I think this is what you refer to: (from ILG's annual report)

Both licenses contain restrictions on transfers by us without Starwood’s or Hyatt’s written consent of (1) the license agreement, (2) all or substantially all of the relevant licensed business or (3) a transaction or series of transactions that result in a “change of control” of ILG or Vistana or HVO. Written consent is not required for a “change of control” of ILG if on the date of the transaction that results in a “change of control” (1) ILG is publicly traded, or (2) ILG is not publicly traded but earnings from the licensed business do not comprise substantially all (90% for Hyatt license) of ILG’s EBITDA at such time; provided that the following conditions are satisfied as of the date of the transaction that resulted in a “change of control” of ILG (a) there are no uncured agreement level defaults, (b) all royalty fees have been paid, and (c) the transferee is not a competitor of the licensor in the hotel, vacation ownership or, for the Starwood license, certain similar transient stay distribution businesses. Vistana’s license also requires a maximum leverage ratio for an acquirer.

Starwood and Hyatt may terminate their respective license agreement upon the occurrence of certain uncured, material defaults by us. Such defaults include, but are not limited to, a payment default, bankruptcy, a transfer in breach of the specified transfer restrictions or a material failure to comply with brand standards on a systemic level.
​

Personally, I don't care much for the Vistana portfolio - too many resorts in the same old locations. But I'm not familiar with how Vistana works and wonder what other owners think (in particular those who own in both systems)

It will be interesting to see what they do with the Hyatt license and portfolio.

 

[CalGalTraveler]

That is unexpected. I was under the impression that either Starwood or Hyatt (or both) had restrictive clauses in their agreements with ILG that impacted the ability for ILG to get acquired by a competing hotel brand. Interesting, will see what happens.

Best,

Greg

Marriott owns Starwood and would consent to the transfer. Perhaps they plan to spin off Hyatt as part of the deal?

It makes strategic sense to align the Marriott/Starwood hotel brands with the associated Marriott/Vistana(Starwood) timeshare assets. Maximizes marketing leverage and brand control. Makes licensing less complicated and gives ILG/MVC more leverage in negotiation with Marriott International.

 

[GregT]

I'm not sure how much cross-pollination we would see in the different timeshare systems. Wyndham owns both Worldmark and Wyndham and there is only limited inter-action between the two timeshare systems, and the point requirements can sometimes be extreme.

It would be similar to Marriott Waiohai requiring 5,000 DC Points for a reservation, but using DC Points to reserve the Westin Princeville would require 7,500 DC Points. This is imprecise, but the point is accurate.

I view this more as Marriott trying to access new (stable) forms of revenue and using the strength of their valuation as a currency.

We will see -- interesting to watch.

Best,

Greg

 

[StevenTing]

I will be interested to see how this plays out. If this allows me more opportunities to travel without the disproportionate cost, I will welcome it. If the aquisition does go through, will we still have an II fee for DC and enrolled weeks? I wish I could see the analysis performed that lead up to the offer. I'd like to see the anticipated synergies and how they value them.

 

[CalGalTraveler]

True, in addition to stable revenue streams, acquisitions are the fastest way to generate topline growth for mid to large companies. Also a lot less risky than organic growth; Wall Street tends to reward growth by acquisition. Boosts the stockprice, CEO gets a nice bonus.

Not sure what this will mean for owners.

 

[VacationForever]

I do not see how Marriott will allow any sort of SOs conversion to DC points. SOs acquisition is cheap, especially when we look at SVV. Vistana is fractured in its model - mandatory resorts where resale makes $0 for Vistana, and having separate Flex systems - one for Sheraton Flex and one for Aventuras. MVC is raking in huge $ with sale of points. MVC will find ways to make $ from VSN resorts and for owners to enter into the same system or separately. MVC knows how to put in an integrated model that makes $$$ for MVC, while making their product attractive for new and existing MVC owners.

 

[mjm1]

I too am interested to see how this plays out. We enjoy our ownerships in both MVC and Vistana. If it goes through, hopefully it will benefit us all as owners as well as the company. That doesn't have to be mutually exclusive.

Best regards.

Mike

 

[Superchief]

Having been through 8 corporate mergers, I'm very skeptical. In my experience with mergers, only executives, lawyers, and investment bankers benefit. Customers, employees, and stockholders usually lose in the long run. MVC corporate has enough problems to resolve based on their lack of communication and poor management of the hurricane damage situation, not to mention the website incompetencies. They should get their own house in order prior to acquiring others.

 

[dioxide45]

Looks like an 11.7% over valuation based on ILGs stock price at open today. I suspect that will make FrontFour Capital Group LLC happy.

It will be interesting to see how it plays out and what will happen with Hyatt. Will Hyatt try to block the deal or cancel their license agreement? It could be possible that the combined company could re-brand those properties under Marriott or Westin or even Ritz Carlton or St Regis Residence Clubs. Also quite likely that ILG/VAC spins off the Hyatt company at the time of the merger.

 

[BigMac]

ILG’s operating businesses include Aqua-Aston Hospitality, Hyatt Vacation Ownership, Interval International, Trading Places International, Vacation Resorts International, VRI Europe, and Vistana Signature Experiences. Within this portfolio they manage 250+ resorts. Can't really see Marriott Vacation Club wanting to keep all of these but who knows.

 

[dioxide45]

From what I have read, this seems to perhaps still be rumor or at most VAC made an offer but no word if ILG actually accepted or even entertained the offer. No official word yet on a preliminary deal. On analyst thinks that $30 may just be an opening bid, perhaps there are other offers on the way.

 

[Superchief]

From what I have read, this seems to perhaps still be rumor or at most VAC made an offer but no word if ILG actually accepted or even entertained the offer. No official word yet on a preliminary deal. On analyst thinks that $30 may just be an opening bid, perhaps there are other offers on the way.

I, for one, really hope it doesn't go through. Owners experiences for existing MVC owners will deteriorate and I am looking forward to using my portfolio in my retirement in a few years. MF's will go up and service will go down. I guarantee it.

 

[vikingsholm]

Bring it.

Want Hyatt in the Marriott family. Yeah!

 

[CalGalTraveler]

If they merge then their timeshare brands have a near monopoly on Kaanapali beach i.e. Hyatt Residences, MOC, Westin South, Westin North, Nanea. No Wyndham, no Hilton that I am aware of. Only exception is Diamond and smaller TS such as Hona Koa etc.

I hope that this could bring economies of scale in terms of renovation, maintenance and housekeeping to keep fees manageable.

 

[amycurl]

Right, because "near monopolies" always bring prices down for consumers.

I'm pretty sure that is not how monopolies work, which is why we have anti-trust laws in the first place.

Sent from my iPad using Tapatalk

 

[CalGalTraveler]

Good point, however I don't think this will be the case for other locations in the network. Perhaps economies of scale is wishful thinking on my part. FWIW, it's not like owners can easily to flip their timeshare from one brand to the other today. So competition is already limited.

 

[dioxide45]

I do not see how Marriott will allow any sort of SOs conversion to DC points. SOs acquisition is cheap, especially when we look at SVV. Vistana is fractured in its model - mandatory resorts where resale makes $0 for Vistana, and having separate Flex systems - one for Sheraton Flex and one for Aventuras. MVC is raking in huge $ with sale of points. MVC will find ways to make $ from VSN resorts and for owners to enter into the same system or separately. MVC knows how to put in an integrated model that makes $$$ for MVC, while making their product attractive for new and existing MVC owners.

I would agree with this. Vistana isn't setup very well to merge in to the MVC or DC program. Another issue that Vistana has is that they have ROFR on so few of their properties. So it can be hard for them to take back cheap inventory. Their fractured model will make it hard to fully integrate. I also think, like Greg mentioned, that if a merger does happen, they will probably operate separately only really integrating back office functions to achieve savings. Like Wyndham, Shell and Worldmark, which are all still pretty separate. They may roll out some crossover booking abilities, but I would expect them to be rather point cost prohibitive. Think Explorer and Cruise bookings with points.

 

[dioxide45]

Thinking about possible integration, it would seem that Marriott could fairly easily integrate Vistana inventroy that they could control in to the DC program. There is nothing really stopping them from conveying Vistana weeks that they own in to the DC trust and offering them up on the DC points chart. Their problem however is getting control of inventory. Vistana only has limited properties with ROFR. Another would be how to handle properties that have their own small points programs in Vistana. Nanea, certain phases of St John, Aventuras, and Sheraton Flex. They have sold points packages out of these small Home Option based programs. They can't easily convey points in those setups over to the DC trust.

As for the Vistana weeks, they could convey any inventory that they would own over to the DC trust. Perhaps they could offer up buybacks or take backs to existing owners. They may even be able to get a lot of resale voluntary owners to simply give up their weeks given the big drop in Vistana inventory in II. They could also offer enrollment in the Destinations Club to Vistana owners where their enrolled weeks could be used in the DC exchange company. Their main challenge would be managing inventory with all the mini systems in a minis system that Vistana has created.

 

[GregT]

Thinking about possible integration, it would seem that Marriott could fairly easily integrate Vistana inventroy that they could control in to the DC program. There is nothing really stopping them from conveying Vistana weeks that they own in to the DC trust and offering them up on the DC points chart. Their problem however is getting control of inventory. Vistana only has limited properties with ROFR. Another would be how to handle properties that have their own small points programs in Vistana. Nanea, certain phases of St John, Aventuras, and Sheraton Flex. They have sold points packages out of these small Home Option based programs. They can't easily convey points in those setups over to the DC trust.

As for the Vistana weeks, they could convey any inventory that they would own over to the DC trust. Perhaps they could offer up buybacks or take backs to existing owners. They may even be able to get a lot of resale voluntary owners to simply give up their weeks given the big drop in Vistana inventory in II. They could also offer enrollment in the Destinations Club to Vistana owners where their enrolled weeks could be used in the DC exchange company. Their main challenge would be managing inventory with all the mini systems in a minis system that Vistana has created.

I think they will keep them separate. There some anomalies in the StarOption schedule (like HRA in summer) and MOC has a major point premium versus WKORV. It would be hard to fix this in point allocations. Plus, Marriott doesn't need more Orlando properties.

I think trying to blend them would only create headaches that Marriott doesn't want and I think any cross pollination would be limited and done through Explorer Collection where they can advertise the possibility but never have to actually deliver it.

I could see where StarOptions owners could enroll their weeks and get some form of access but Marriott property dumps any redeemed week into Interval or rents it versus actually putting it into the Exchange. It will be interesting to see it develop over time.

Best,

Greg

 

[Heron]

Here's how I'm guessing this will go. Vistana perks will decrease. When you come in for a special owner update just to hear all the new options available to you, they will make a special offer for you to buy your way into the Marriott system. Don't worry, you'll get a much better deal than someone from the outside buying in I'm sure.

 

[VacationForever]

Does it mean we should all go out and buy a bunch of Vistana red/platinum weeks in the hope that we get them transferred before the cutoff date, and in the hope that the weeks can get enrolled?!

 

[SueDonJ]

Since the DC inception I've been expecting that eventually MVW will be integrating other-branded timeshares into the DC Exchange Company metric. If this turns out to be the first foray, watching all the machinations is going to be very interesting.

 

[dioxide45]

Does it mean we should all go out and buy a bunch of Vistana red/platinum weeks in the hope that we get them transferred before the cutoff date, in the hope that the weeks can get enrolled?!

I wouldn't take that gamble.