Friday 30 September 2016

Hilton Worldwide to spin off its real estate holdings into separate business

Dahlia Fahmy

Published 05/06/2016 | 02:30

Hilton said in February it will spin off its lodging properties and time-share business to create three separate, publicly traded companies in order to boost shareholder value as the hotel operator faces increased competition.
Hilton said in February it will spin off its lodging properties and time-share business to create three separate, publicly traded companies in order to boost shareholder value as the hotel operator faces increased competition.

Hilton Worldwide said the planned spin-off of its real estate will create a company, to be called Park Hotels & Resorts, that will be the second-largest publicly traded real estate investment trust in the lodgings industry.

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The newly formed entity, which will contain most of Hilton's properties, will have earnings before interest, taxes, depreciation and amortization of as much as $825m (€728m) in 2016, Hilton said in a statement. In 2015, the unit had adjusted EBITDA of $817m.

Hilton said in February it will spin off its lodging properties and time-share business to create three separate, publicly traded companies in order to boost shareholder value as the hotel operator faces increased competition. One-time cash uses connected to the spin-offs will include a $250m transaction expense, a $200m special dividend and $200m for a tax acceleration.

"As a result of the proposed transactions, we expect to unlock growth opportunities that are embedded within the three businesses and take advantage of capital market and tax efficiencies," said Hilton chief executive Chris Nassetta said in the statement.

On a stand-alone basis, Hilton's pro-forma adjusted EBITDA for 2016 will be as much as $1.8 billion. The company will continue to pay out a dividend of 30pc to 40pc of recurring cash flow. Remaining free cash will be returned to shareholders and Hilton plans a share buyback once the spin-offs are completed.

The spin-offs of Park Hotels and Hilton's time share business - named Hilton Grand Vacations - will be tax-free, said the company. (Bloomberg)

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