Marriott to spin off timeshare division into separate company
Monday, February 14, 2011; 7:49 PM
Marriott International Inc. said it will spin off its timeshare division into a new company through a special tax-free dividend it will pay shareholders later this year.
The announcement came Monday as Bethesda-based Marriott released fourth-quarter net income of $173 million on $3.6 billion in revenue, a significant increase over the $106 million in net income and $3.4 billion the company generated for the same quarter a year ago.
Marriott's timeshare business in 2010 had $1.2 billion in revenue, roughly 10 percent of the company's total revenue. The division has $1.5 billion in unsold inventory. The timeshare segment has 71 properties, more than 400,000 owners and 10,000 employees.
Investors had pressed Marriott to take some sort of action on its timeshare operations, preferring the company as a pure-play, fee-based hotel management business.
"The financial crisis slowed the ability of companies to develop timeshare properties and it made it more difficult for buyers to borrow money to make these purchases," said C. Patrick Scholes, gaming and lodging analyst at FBR Capital Markets. "It wasn't a perfect fit with Marriott's global hotel management franchise business."
The Marriott family will maintain a 21 percent ownership in both companies.
The new structure will allow Marriott International to concentrate on its core lodging management and franchise business. It will also get franchise fees from the timeshare company's use of Marriott and its Ritz-Carlton brands.
The companies will have separate boards of directors. J.W. Marriott Jr. will remain chairman of the board and chief executive officer of Marriott International. Stephen P. Weisz, president of Marriott's timeshare business since 1997, will become chief executive of the new company.
Marriott said in a statement that Marriott International does not expect to change its fourth-quarter dividend as a result of the transaction.
The transaction will not require shareholder approval.