Hilton Worldwide to Spin Off Timeshare Business, Park Hotels Unit, Split One for Three

Hilton Worldwide Holdings (HLT)  said it will spin off its Park Hotels & Resorts and Hilton Grand Vacations subsidiaries and create three separately traded public companies, to take effect after the market closes on Jan. 3, 2017.

Park, a portfolio of hotels and resorts currently held by Hilton, will begin trading on the New York Stock Exchange on Jan. 4, 2017, as "PK" and Hilton Grand Vacations, the company's timeshare business, will begin trading the same date as "HGV" on the NYSE, Hilton said in a statement this morning. The remainder of the business will keep trading under the symbol HLT.

With Hilton planning to increase its presence in 91 of the 104 countries it's already doing business, the spinoff allows the parent company to grow without the burden of managing its giant timeshare unit or owning properties, TheStreet reported earlier.

The two spinoffs will maintain a long-term licensing agreement with Hilton and both are tax free. Recent legislative changes, which took effect in May, placed restrictions on tax-free REIT spinoffs but the parent company's Park transaction is grandfathered in.

Hilton said it will issue 198 million shares of Park common stock and 99 million shares of HGV common stock on Dec. 15 to its shareholders. Hilton shareholders will receive one share of Park common stock for each five shares of Hilton common stock and one share of HGV for each ten shares.

Fractional shares of Park and HGV will not be issued. Instead, Wells Fargo NA, acting as distribution agent, will aggregate fractional shares of Park and HGV common stock and sell the whole shares in the open market. The aggregate net cash proceeds of the sales will be distributed to the shareholders who otherwise would have been entitled to the fractional shares.

A person with knowledge of the spinoff said it is not clear right now how much these shares will be worth at the time of the distribution, given there is no set price as there would be in an initial public offering (IPO).

Shares of Hilton rose 71 cents, about 2.81%, to $25.97 late Monday morning.

"As three independent companies, Hilton, Park Hotels & Resorts and Hilton Grand Vacations will be well-positioned to capture incremental growth opportunities and capital market efficiencies in their respective business," Hilton President and CEO Christopher J. Nassetta said in a statement.

Hilton's board also approved a one to three reverse split of its shares, effective after trading ends on Jan. 3. Under the reverse stock split, every three shares of Hilton will be automatically combined into one share of Hilton common stock, reducing its total outstanding shares to 330 million from 990 million.

No fractional shares will be issued in connection with the reverse stock split. Shareholders who would have received a fractional share of Hilton will instead be entitled to a cash payment, according to the company.

Following the spinoff, Thomas J. Baltimore, Jr., former chief executive of RLJ Lodging Trust (RLJ) , will serve as CEO of Park and Hilton Executive VP and President Mark Wang will serve as CEO and director of HGV.

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