BETHESDA, MARYLAND Marriott International Inc. will split the company’s hotel and timeshare businesses into two separate, publicly traded companies.
Under the plan, the new company will focus on the timeshare business as the exclusive developer and operator of timeshare, fractional and related products under the Marriott brand and the exclusive developer of fractional and related products under the Ritz-Carlton brand. After the split, Marriott International will concentrate on the lodging management and franchise business. Marriott will also receive franchise fees from the timeshare company’s use of the Marriott and Ritz-Carlton brands.
The move, which will create the world’s largest standalone timeshare company, will be executed late this year through a special tax-free dividend to Marriott International shareholders. After the special dividend, the Marriott family is expected to hold approximately 21% of the outstanding common stock of each company.
The as-yet-unnamed new company owns 71 properties with 33,000 units and boasts US$1.5 billion in unsold assets.
“Marriott took a bold step when we introduced our Marriott brand to the timeshare industry in 1984,” says Chairman and CEO Bill Marriott. “In this transaction, we take another innovative step forward as we combine the power of the Marriott and Ritz-Carlton brands with the flexibility and focus of a new independent timeshare company.
“The transaction will permit both companies to tailor their business strategies to best address market opportunities in their respective industries. The new timeshare company will be positioned to expand faster over time, while Marriott International will further advance its longstanding strategy of separating real estate from management and franchise operations. With two public companies, shareholders will be able to pursue investment goals in either or both companies rather than one combined organization.
“Marriott Vacation Club owners and guests and The Ritz-Carlton Destination Club members should see no change in the branding or quality of their properties, services, usage options, use of Marriott Rewards points, or access to Marriott International’s hotels. The companies will continue to work together to provide outstanding vacation experiences, similar to the relationship between Marriott International and the franchisees of its hotel properties. After the split, both companies will remain dedicated to the highest standards of quality and value and the brand promise for which Marriott and Ritz-Carlton are well known and widely respected.
“Day-to-day operations at both companies should not be affected by this transaction. During the past few years, our company has brought staffing levels and expenses in line with operating conditions across our businesses. While we will continue to improve efficiency where possible, we do not expect this transaction to result in work force reductions. Associates should continue to have attractive career opportunities due to the growth prospects of both companies.”
As two separate public companies, both Marriott International and the new company will have separate boards of directors. Bill Marriott will remain chairman of the board and CEO of Marriott International. Stephen P. Weisz, president of Marriott’s timeshare business since 1997 and a 39-year Marriott veteran, will become CEO of the new company. William J. Shaw, who recently announced his retirement as vice chairman of the company at Marriott International and also resigned from its board, will become chairman of the board of the new timeshare company. Deborah Marriott Harrison, senior vice president of government affairs for Marriott International, will serve as a board member.
“Our new company will be independent and the largest pure-play timeshare firm in the world,” Weisz says. “We will be publicly-held and financially sound with significant growth opportunities, including meaningful upside as the economic recovery proceeds. We believe our outstanding brands, unparalleled operating skill, prime resort locations and world-class sales expertise will continue to provide us with a significant competitive advantage.
“With the launch of the Marriott Vacation Club Destinations timeshare program, our points-based product, in 2010, we are confident in our ability to fulfill the dreams and meet the growing expectations of our customers. We expect to continue to create value for shareholders through a diverse stream of income, including development, management and financing. We dramatically improved our cost structure and efficiency in the last two years and are well-positioned for the upturn. And with over US$1.5 billion in timeshare segment inventory at year-end 2010, our near-term investment needs are modest. All in all, we expect to generate meaningful cash from operations in the next few years. I am enormously excited by this new opportunity for our business and our associates.”
Marriott International will continue to be listed on the New York Stock Exchange and expects that the new timeshare company will also be listed on the New York Stock Exchange. The new timeshare company does not expect to pay a quarterly cash dividend or be investment grade in the near term. Marriott International does not expect to change its quarterly cash dividend as a result of this transaction.