MCLEAN, Va.—Hilton Worldwide Holdings has announced that Form 10 Registration Statements have been filed with the U.S. Securities and Exchange Commission (SEC) for its timeshare business and the bulk of its real estate business in connection with the previously announced plans to pursue a separation into three distinct, publicly traded companies.
The filings provide detailed information on the business, strategy, and historical financial results of both entities on a “carve-out” basis, as well as further details on license and management agreements between the companies going forward. The filings will be updated with additional information in subsequent amendments as further information on the transactions is finalized prior to separation, which is expected to be completed by the end of the year.
“The filing of the Form 10 Registration Statements is an important milestone in simplifying Hilton to a capital-light, fee-based business, while fully activating our real estate and timeshare businesses as stand-alone companies,” said Christopher J. Nassetta, president and chief executive officer of Hilton. “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. We look forward to completing the spins later this year, realizing significant benefits for all three companies and continuing to generate long-term value for Hilton shareholders.”
The New, Simplified Hilton: A Market-Leading Fee-Based Business
On a Pro Forma1 basis, over 90 percent of Hilton’s Adjusted EBITDA comes from fees, of which nearly 90 percent are driven by franchise fees and top-line driven base management fees. Hilton’s 13 brands each lead their respective categories, targeting a clear market segment and customer at scale. As a result, Hilton expects to continue leading the industry in organic net unit growth as a percentage of installed base without significant use of capital. Hilton will continue to be led by Chris Nassetta as chief executive officer and Kevin Jacobs as chief financial officer.
On a stand-alone basis, Hilton’s Pro Forma Adjusted EBITDA for full year 2016 is projected to be between $1,770 million and $1,830 million, inclusive of Pro Forma Corporate & Other for full year 2016 between $240 million and $250 million and an incremental $45 million to $50 million of Pro Forma management fee revenue from the real estate business. As of year-end 2016, Hilton’s Pro Forma net leverage is projected to be between 3.25x and 3.5x Adjusted EBITDA.
Hilton will maintain a commitment to achieving a low-grade investment grade credit profile and expects to continue a dividend payout ratio of 30 percent to 40 percent of recurring cash flow with the remaining free cash available for capital return to shareholders. Hilton expects to initiate a share buyback program following the completion of the transactions.
Park Hotels & Resorts: Premium Assets with a Scaled Platform and Strong Growth Potential
The real estate business, to be named Park Hotels & Resorts, is a leading lodging real estate company with a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value. Its high-quality portfolio consists of 69 premium-branded hotels and resorts with nearly 36,000 rooms located in prime U.S. and international markets with high barriers to entry. Over 85 percent of Park’s rooms are luxury and upper upscale and nearly 90 percent are located in the United States, including 14 of the top 25 markets as defined by Smith Travel Research (STR). Over 70 percent of its rooms are located in the central business districts of major cities and resort/conference destinations.
With $2.7 billion of revenue, $817 million of Adjusted EBITDA and $299 million of net income in 2015, Park will be the second-largest publicly traded lodging REIT.
Park is focused on generating attractive long-term total returns by enhancing the value of its exceptional properties and utilizing its scale to efficiently allocate capital while maintaining a strong and flexible balance sheet.
As previously announced, Park will be led by industry veterans Tom Baltimore, previously president and chief executive officer of RLJ Lodging Trust, as chief executive officer and Sean Dell’Orto, currently SVP & treasurer of Hilton, as chief financial officer.
Park’s Pro Forma Adjusted EBITDA for full year 2016 is projected to be between $795 million and $825 million, inclusive of Pro Forma Corporate & Other for full year 2016 of approximately $40 to $45 million. Additionally, prior to the spins, it is anticipated that certain rooms at Park hotels in New York, Hawaii, and Washington D.C. will be contributed to HGV for future conversion to timeshare inventory. As of year-end, Park’s Pro Forma net leverage is projected to be between 3.75x and 4.0x Adjusted EBITDA.
