Hilton Grand Vacations strikes deal to acquire Diamond Resorts

[GT75]

HGV strikes deal to acquire Diamond Resorts - https://seekingalpha.com/news/36711...k-3&utm_medium=email&utm_source=seeking_alpha


or HGV press release - https://www.hiltongrandvacations.co...es-pdf/hgv_press-release_2021-03-10_final.pdf

or Q&As on HGV Club page - https://club.hiltongrandvacations.com/en/hgv-announces-plans-to-acquire-diamond-resorts

Previous threads on this merger when Apollo was looking to buy HGV - https://tugbbs.com/forums/threads/apollo-group-looking-to-buy-hgvc-merged.294385/ or https://tugbbs.com/forums/threads/apollo-diamond.314104/

 

[dioxide45]

Looks like Apollo is losing a bunch of money on the deal. DIdn't they pay over $2 billion to buy Diamond and now they are selling for $1.5 billion?

 

[ocdb8r]

WOW, this is quite a turn of events....just a year ago we were all worried the reverse was going to happen.

I wonder how this all pans out. There is a lot more variance in quality of resorts within Diamond (in my experience).

 

[BingoBangoBongo]

Looks like Apollo is losing a bunch of money on the deal. DIdn't they pay over $2 billion to buy Diamond and now they are selling for $1.5 billion?

It looks to be an all stock deal so they haven't lost the half billion yet.

 

[dayooper]

WOW, this is quite a turn of events....just a year ago we were all worried the reverse was going to happen.

I wonder how this all pans out. There is a lot more variance in quality of resorts within Diamond (in my experience).

There was a quarterly report awhile ago that said they were looking to promote an entry-level system. I wonder if some of these resorts would be part of that?

 

[dayooper]

So glad this didn't go the other way. Hopefully, the system we are currently in will stay the same and we get access to the DRI resorts!

 

[Pathways]

So Diamond will own 28% of HGVC. The question will be: will they sell some of that and lower their ownership? Or increase it and take over HGVC?

 

[BingoBangoBongo]

So Diamond will own 28% of HGVC. The question will be: will they sell some of that and lower their ownership? Or increase it and take over HGVC?

So Diamond Apollo Funds and the other Diamond stockholders, including the Reverence Funds will own 28% of HGVC. The question will be: will they sell some of that and lower their ownership? Or increase it and take over HGVC?

They are looking to maximize their investment, whatever path that may be.

 

[alexadeparis]

Looking forward the accessing the Embarc and Grand Pacific resorts, the others not so much. I would hope that if folded into the HGVC system, that the points levels for the “entry level” resorts, which seems to be the vast majority of the Diamond holdings, would be more like the gold silver and bronze HGVC point levels by unit size. I definitely would not stay at most of those. I have successfully avoided them in the exchange systems and I don’t intend to use any of those.

 

[Magus]

On 3/10 BMO, HGV announced a definitive agreement to acquire Diamond Resorts International from Apollo and Reverence Capital in a total deal value of ~$3.0BN, with consideration paid by HGV to be approximately $1.4BN. In return, the Apollo funds and other Diamond stockholders will receive 34.5MM of HGV's common shares. Post the transaction, HGV shareholders will own around 72% of the combined company, with Apollo owning the other ~28%. Points: The acquisition accelerates the launch of HGV branded trust product, which will be combined with Diamond's points based product. HGV aims to lower the barrier to entry for ownership, reduce earnings volatility, facilitate inventory recycling, and generate seamless upgrades. Building Scale: The acquisition will combine Diamond's 92 leisure resorts and ~400,000 owners with HGV's ~325,000 owners and 62 properties. The new entity will have access to over 20 new markets and a portfolio of 48 sales centers and ~720,000 owners. Synergies: The company expects run-rate cost synergies of $125MM in the first two years following close with the potential for significant revenue synergy opportunities. In addition, the combined company is expected to generate an adjusted FCF conversion rate of between 50-60%, due to cost management, a strong pipeline and acquired inventory, and reduced long-term inventory spend. In aggregate, the company is also expected to generate 50% of Segment Adjusted EBITDA from recurring sources following the acquisition. Liquidity and Leverage: The company expects rapid deleverage to below 3.0x with the next two years, and has a pro-forma liquidity of $1.0BN. Our focus on the call. We will provide an update post the conference call at 8:30am. The dial-in number is (877) 407-0784. Note from research analysts this morning

 

[Magus]

I don't always need to stay upscale and I will be glad to have additional international destinations. An all stock deal means not worried about debt, which is a bonus. Pending details of the system merger and the equiv HGV points for these new ones, I am happy with this transaction.

 

[BingoBangoBongo]

We stayed at a property Diamond now operates in Whistler (late June) and would look forward to getting back there.

 

[DazedandConfused]

I am not sure this is good news or bad news for HGVC members, but I am leaning towards this is bad news

 

[dioxide45]

With the plan to rebrand the DRI resorts over time to HGVC, then it would seem there may be added inventory pressure for reservations at existing HGVC properties if there is some type of opt in or enrollment for DRI owners to begin using HGVC resorts. Will more people be wanting to book Hilton vs owners wanting to cross over to Diamon?

 

[hurnik]

Interesting. Cabo Azul is a very nice resort. Can't get into it with RCI currently (it's listed but when I tried to submit an OGS it failed and I called in and the lady said it's not accepting anything from RCI--this was last year, BTW).

 

[bnoble]

Looking forward the accessing the Embarc and Grand Pacific resorts

When did Diamond acquire GPX? I missed that.

 

[Magus]

With the plan to rebrand the DRI resorts over time to HGVC, then it would seem there may be added inventory pressure for reservations at existing HGVC properties if there is some type of opt in or enrollment for DRI owners to begin using HGVC resorts. Will more people be wanting to book Hilton vs owners wanting to cross over to Diamon?

The devil will be in the details, but I imagine there will be roughly the same amount. Budget conscious folks will want to stretch their points and stay at Diamond, or if Diamond opens up markets you want to go but didn't have unless with RCI. More upscale conscious folks + HGV market opens you want to go but didn't have previously will eat into HGV system. I imagine it will be a wash. In general, more options are better, and the fact that HGV + HGV mgmt remain in control here - not Apollo who likely gets 1-2 Board seats - plus no debt incurred, I think its very likely a good thing for *most* HGV owners.

 

[GT75]

I am not sure this is good news or bad news for HGVC members, but I am leaning towards this is bad news

I honestly am wondering the same thing. On the positive side, this is better than Apollo owning/controlling HGV directly. On the negative side, Apollo will have a large stake in HGV.

With the plan to rebrand the DRI resorts over time to HGVC, then it would seem there may be added inventory pressure for reservations at existing HGVC properties if there is some type of opt in or enrollment for DRI owners to begin using HGVC resorts. Will more people be wanting to book Hilton vs owners wanting to cross over to Diamon?

This to me anyways sounds similar to the Marriott/Vistana/Hyatt merger {except those were all top qualify resorts) 1 or 2 years ago. You are way more familiar with that merger but I think that is still a "work in progress". It really depends on how the new rules for HGV TS system will be written. Will there be one set of rules for both systems? I think that DRI has several different sets of rules now within its own system. I guess what I am trying to say is that it is way too early to tell what this means for us HGV owners right now.

 

[elaine]

So, would a diamond owner have access to HGVC units?

 

[Seaport104]

Received this email from Diamond at 10:00 am this morning. Quite a suprise!!! Dear Members and Owners, Thank you for your continued trust and loyalty in Diamond Resorts. We strive to provide you with world-class destinations, unforgettable experiences and superior service — helping you to reconnect with what matters most. With that in mind, I am thrilled to announce an exciting new chapter for Diamond Resorts that we expect will provide you with even more options and flexibility for your vacation ownership. Diamond Resorts and Hilton Grand Vacations (“HGV”) have signed an agreement to join together as one company, with HGV as the acquirer. This combination will bring together the iconic Hilton Grand Vacations brand with the scale and unique culture of Diamond Resorts to create a new global standard of vacation ownership hospitality. Leading the Industry: More Options in More Destinations = More Memories Together, the combined company will become one of the largest global timeshare networks, spanning North America, Europe and Asia. The HGV network delivers exciting new resorts in dozens of sought-after beach, ski and city destinations, including New York, Charleston, Park City and Japan. The Diamond Resorts & Hilton Grand Vacations Commitment Our commitment to our members and owners is that your vacation experience remains our top priority. Together, we believe we will provide you with one of the broadest offerings available in the vacation ownership industry and achieve new heights of excellence. As an existing Diamond member or owner, you will continue to have access to the same benefits you have come to enjoy, including: access to Diamond’s resort portfolio, the Destination Xchange® program, the expanded Diamond Dream Holiday selection and our exclusive Events of a Lifetime® series. Over time, we expect most of our Diamond-managed properties to be rebranded under a new HGV sub-brand, further elevating your vacation experience. Keeping You Informed The transaction is subject to customary closing conditions, and we expect it will take several months to complete. We are committed to being transparent with you throughout this exciting process. To keep you informed, we will endeavor to share important updates as they become available in the What’s New [u6290299.ct.sendgrid.net] section of your Member Area. If you have any questions, your Member Services team is available to assist you at any time as always. We look forward to providing you regular updates on the status of this transaction. The completion of this transaction will mark the beginning of a new era of exceptional travel experiences. We can’t wait for you to see the many new destinations and extraordinary experiences in store for you. As always, our owners and members are at the heart of what we do, and we are honored to celebrate starting this new chapter with you. Mike Flaskey CEO, Diamond Resorts

 

[dioxide45]

So, would a diamond owner have access to HGVC units?

I would expect it at some point. HGVC has a pretty simple point overlay. They could just assign points values to the resorts/seasons of Diamond properties and offer up some type of enrollment, like they do now for resales and affiliates.

 

[colatown]

When did Diamond acquire GPX? I missed that.

They didn't.

 

[dayooper]

Points: The acquisition accelerates the launch of HGV branded trust product, which will be combined with Diamond's points based product. HGV aims to lower the barrier to entry for ownership, reduce earnings volatility, facilitate inventory recycling, and generate seamless upgrades.

With the plan to rebrand the DRI resorts over time to HGVC, then it would seem there may be added inventory pressure for reservations at existing HGVC properties if there is some type of opt in or enrollment for DRI owners to begin using HGVC resorts. Will more people be wanting to book Hilton vs owners wanting to cross over to Diamon?

I think this will be a different subsystem. They've talked about a lower entry cost option for a while now and this might be the way they are going to handle it. Keep DRI as a trust with a lower entry point than HGVC and upsell into the current system. HGVC has been upselling for quite awhile. Get younger members in with a lower buy-in and sell them on the higher quality of HGVC properties in an upsell. Offer the "DRI" members reduced packages to try out the resorts and sell them on the greater quality. Maybe incorporate Embarc back into the HGVC fold but leave the DRI system as a separate sub-system. The quote from Magnus found leads me to think in that direction.

This to me anyways sounds similar to the Marriott/Vistana/Hyatt merger {except those were all top qualify resorts) 1 or 2 years ago. You are way more familiar with that merger but I think that is still a "work in progress". It really depends on how the new rules for HGV TS system will be written. Will there be one set of rules for both systems? I think that DRI has several different sets of rules now within its own system. I guess what I am trying to say is that it is way too early to tell what this means for us HGV owners right now.

Maybe, but the quality level isn't as high at the Diamond resorts, correct? I don't think the current HGVC leadership would take that chance with their current members. Because of the differences in the system, isn't Marriott having a hard time incorporating Hyatt and are leaving them kinda on their own? The big difference is how the systems work, correct? Marriott being a trust and Hyatt being a system like HGVC (points based on the various weeks owned at various resorts). If I remember correctly, DRI is mostly a trust system. They don't mesh well. Keeping the somewhat separate systems and maybe allowing an exchange of points at different rates.

 

[holdaer]

Some context, DRI has a LOT of affiliated resorts. It's difficult to determine which resorts are true DRI resorts vs 'affiliated' resorts. Plus, these 'affiliated' resorts are not part of the acquisition per HGVC.

 

[buzglyd]

This is interesting and I wonder what properties will be in the HGV system going forward?

I’ve stayed in a few Diamond properties. Some are really nice and some are meh.

Cabo Azul and Embarc Palm Desert are fantastic. I’d use my points for either one of those.