Starwood Hotels Is Surging Almost 9% Because Of This Spin-Off

Shares of Starwood Hotels & Resorts Worldwide Inc HOT spiked upwards over 8 percent Tuesday following an announcement that it would spin-off its vacation ownership business.

The company’s press release indicated that the move to make Starwood Vacation Ownership (SVO) a separate publicly traded company would accelerate its continued “Asset Light” transformation.

SVO reported vacation ownership revenues of approximately $640 million in 2014, and during the past 30+ years has sold more than $6 billion of vacation ownership intervals to over 220,000 owners.

SVO will develop and operate 22 timeshare resorts, and expand on land already owned.

It will be a “pure-play vacation ownership company with a seasoned management team and a strong balance sheet to take advantage of increasing growth opportunities within the timeshare industry,” according to the press release.

Frits van Paasschen, President and Chief Executive Officer of Starwood, stated:

“Separating this distinct part of our business will allow Starwood to continue participating in this growth industry through a fee-based business model, as we do with our managed and franchised hotel business. This transaction puts us in a position to build on the strength of our brands to fuel growth and create shareholder value for both companies.”

Matthew Avril, who retired as President of Starwood’s Hotel Group in 2012, will return to lead the new company as Chief Executive Officer, and Stephen Williams will continue to serve as Chief Operating Officer.

The spin-off of SVO, which is expected to be tax-free to Starwood shareholders, will be effected through a pro rata distribution of the new entity’s stock to existing Starwood shareholders.

In addition to the spin-off news, on Monday, the company’s Board of Directors declared a first quarter cash dividend of $0.375 per share, an increase of 7.1 percent over the prior quarterly dividend. The cash dividend will be paid on March 26, 2015 to shareholders of record on March 5, 2015.

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