VAC/ILG shareholder activism speculation [THREAD CLOSED]

[BigMac]

Look what's happened to the share price of VAC and ILG over the last year. Almost step by step. HGV not so much.

Also it looks like ILG has fewer "properties" than VAC but manages a whole bunch of second/third class timeshares,

"As of the end of December, it had a total of 41 resorts within its Vistana Signature Experiences and Hyatt Vacation Ownership businesses, and managed about 250 resorts overall, while serving more than 2 million members through various membership and exchange programs". While it would be great to get direct access to Hyatt, Sheraton and Westin properties, not sure how a merger which included the rest under ILG management would benefit us.

 

[dioxide45]

While it would be great to get direct access to Hyatt, Sheraton and Westin properties, not sure how a merger which included the rest under ILG management would benefit us.

I would agree. ILG seems to be running these programs completely separately. I think though because Westin and Sheraton are operated by a separate company than Hyatt on the hotel side, they really couldn't market them together. Though with the combined Marriott and Starwood hotel brands under Marriott International, it does open up the possibility that if ILG acquired VAC, they could somehow bring the two together under a single timeshare company.

 

[nuwermj]

Also it looks like ILG has fewer "properties" than VAC but manages a whole bunch of second/third class timeshares,

"As of the end of December, it had a total of 41 resorts within its Vistana Signature Experiences and Hyatt Vacation Ownership businesses, and managed about 250 resorts overall, while serving more than 2 million members through various membership and exchange programs". While it would be great to get direct access to Hyatt, Sheraton and Westin properties, not sure how a merger which included the rest under ILG management would benefit us.

ILG is more diversified than Marriott. In addition to running Interval International and Trading Places, they also have a siginficant rental business (Aqua-Aston) and resort management business (VRI). They are not the developer, only the manager, at the VRI resorts. Vacation Ownership is only about 60 percent of ILG's business.

 

[BigMac]

Looks like FrontFour is still pushing the ILG/MVC merger
https://www.bloomberg.com/news/arti...ce-activist-pressure-to-strike-deal-this-year

 

[dioxide45]

FourFront disclosed they own a 2% stake in ILG. Perhaps they need to disclose how much they own of VAC?

 

[BigMac]

FourFront disclosed they own a 2% stake in ILG. Perhaps they need to disclose how much they own of VAC?

Looks like they own almost 5% of ILG bot nothing of VAC
https://whalewisdom.com/filer/frontfour-capital-group-llc

 

[dioxide45]

Looks like they own almost 5% of ILG bot nothing of VAC
https://whalewisdom.com/filer/frontfour-capital-group-llc

I think the 5% is the percentage that ILG makes up in their portfolio. According to the link in post #24, they own only 2% of ILG. At least it seems they aren't pushing ILG to buy VAC so they can somehow end up with a larger share of the merged company because they already own a bunch of VAC.

 

[JIMinNC]

I think the 5% is the percentage that ILG makes up in their portfolio. According to the link in post #24, they own only 2% of ILG. At least it seems they aren't pushing ILG to buy VAC so they can somehow end up with a larger share of the merged company because they already own a bunch of VAC.

My read is that FrontFour isn't pushing ILG to acquire MVW, but that the are pushing ILG to strike a deal to be acquired by MVW at a substantial premium to the current value of ILG stock

 

[dioxide45]

My read is that FrontFour isn't pushing ILG to acquire MVW, but that the are pushing ILG to strike a deal to be acquired by MVW at a substantial premium to the current value of ILG stock

Ahh, that makes more sense now.

 

[Xpat]

I noticed in the last MVW and ILG earning calls that analysts were quite interested into how both companies see their marketing rights to SPG/Marriott hotel guests and members now and in the future, when Marriott eventually combines Marriott Rewards and SPG.

I thought it was interesting that MVW sees its rights to the successor program to Marriott rewards as exclusive. If that is true, it might lock out ILG from marketing to the new program's membership base. Obviously, ILG doesn't see it that way and claims they have "ironclad" rights to market to the successor program used by Westin and Sheraton.

ILG's Craig Nash: "An important aspect of our licenses is access to the loyalty programs associated with each brand. Specifically, with respect to Westin and Sheraton, it includes the rights to market the SPG, our agreements also give us ironclad rights to market to any successor or replacement program used by the Westin and Sheraton hotel brands if Marriott decided to change the current loyalty plan structure."

MVW's Steve Weisz: "we have exclusive rights to the Marriott reward members and to any successor program to Marriott rewards from a marketing perspective. That means in terms of being able to make solicitations and marketing approaches to people not necessarily aligned with their hotel stay. In addition to that, we also talk to Marriott hotel guests as they stay in our Marriott hotels where we have linkage agreements. In a similar fashion, we're talking to guests that are staying in select Sheraton and Westin hotels. But we're not certainly marketing to the SPG marketing database to generate tours."
​

Maybe that's an additional incentive for ILG to look at ways to combine all or some of its businesses with MVW.

Now, while I do like the Marriott/SPG combination (lots of new places to stay at, especially internationally), I'm not really looking forward to a MVW/ILG tie up. Somehow I feel MVW's exclusive relationship with Marriott better preserves the value proposition of the MVC system. I guess we'll just have to wait and see.

 

[dioxide45]

It will be interesting to see how things play out when Marriott merges MR and SPG.

 

[JIMinNC]

Now, while I do like the Marriott/SPG combination (lots of new places to stay at, especially internationally), I'm not really looking forward to a MVW/ILG tie up. Somehow I feel MVW's exclusive relationship with Marriott better preserves the value proposition of the MVC system. I guess we'll just have to wait and see.

But, if Marriott Vacations Worldwide did acquire ILG, then one company would control all of the timeshare brands that correspond to the hotel brands owned by Marriott International. So, that seems like a simpler structure than the current situation where Marriott International licenses their brands to two different competing timeshare companies - MVW and ILG. The oddball with a merged MVW/ILG would be the Hyatt-branded timeshares (which have no connection to Marriott International-owned brands), but that could wind up being a chip to play as a potential divestiture to satisfy any anti-trust concerns in getting a merger approved by DOJ.

 

[dioxide45]

But, if Marriott Vacations Worldwide did acquire ILG, then one company would control all of the timeshare brands that correspond to the hotel brands owned by Marriott International. So, that seems like a simpler structure than the current situation where Marriott International licenses their brands to two different competing timeshare companies - MVW and ILG. The oddball with a merged MVW/ILG would be the Hyatt-branded timeshares (which have no connection to Marriott International-owned brands), but that could wind up being a chip to play as a potential divestiture to satisfy any anti-trust concerns in getting a merger approved by DOJ.

ILG could also divest itself of Vistana and just allow it to merge with MVW. That is probably less likely since the Starwood/Vistana and ILG merger was a tax free arrangement and divesting Vistana would complicate things and could get very expensive. I don't like the idea of three luxury hotel branded timeshares under one umbrella. It certainly wouldn't be good for the customer.

 

[amycurl]

Normally, I think there would be legitimate anti-trust concerns with an ILG/MVW merger. However, I don't think this DOJ would even bat an eyelash.

 

[dioxide45]

Normally, I think there would be legitimate anti-trust concerns with an ILG/MVW merger. However, I don't think this DOJ would even bat an eyelash.

They probably won't, unless we try to find ways to bring the issue to their attention.

 

[Xpat]

The oddball with a merged MVW/ILG would be the Hyatt-branded timeshares (which have no connection to Marriott International-owned brands), but that could wind up being a chip to play as a potential divestiture to satisfy any anti-trust concerns in getting a merger approved by DOJ.

I guess it would be convenient if Hyatt was acquired by Hilton, then HGVC could acquire the HRC portfolio and things would then be nicely aligned in the hotel/timeshare world.


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[Xpat]

I don't like the idea of three luxury hotel branded timeshares under one umbrella. It certainly wouldn't be good for the customer.

Not to mention that there’s a lot of overlap between the MVC and Vistana portfolio. Who needs that many resorts in Orlando, Palm Springs and Phoenix?

The Hyatt portfolio however would be a wonderful addition to any of the timeshare groups. Which I guess is probably why that won’t happen!


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[lizap]

Normally, I think there would be legitimate anti-trust concerns with an ILG/MVW merger. However, I don't think this DOJ would even bat an eyelash.

Very true statement..

 

[nuwermj]

Normally, I think there would be legitimate anti-trust concerns with an ILG/MVW merger. However, I don't think this DOJ would even bat an eyelash.

Why would you think there is an anti-trust issue -- regardless of who's running the DOJ? The top four firms manage less than 30% of the timeshare resorts. An ILG/MVW merger would not produce a concentration ratio anywhere close to the Anti-trust Division's trigger ratio.

 

[JIMinNC]

Why would you think there is an anti-trust issue -- regardless of who's running the DOJ? The top four firms manage less than 20% of the timeshare resorts. An ILG/MVW merger would not produce a concentration ratio anywhere close to the Anti-trust Division's trigger ratio.

I think it would depend on how the DOJ defined the "market". If they define it as you suggest as all timeshares, then you are 100% correct, there is very little concentration in that very fragmented business. If, on the other hand, the market were defined as all hotel-branded timeshares, the concentration ratio would likely look very different. I'm sure if ILG and MVW ever do decide to follow FrontFour's urging and merge, they would focus their arguments on the entirety of the timeshare market, but opponents would focus on the hotel-branded timeshare market. DOJ would have to sort it out.

Back when I worked in banking, I had the opportunity to work on the merger application for several banks we were buying back in the 1980s and early 1990s. When we calculated the resulting market share in our application, we counted commercial banks, savings banks, finance companies, credit unions - basically any company involved in the broadest definition of banking - so our resulting share would be less. The groups who opposed our merger applications based their arguments only on the resulting marketshare in the commercial bank sector to present their case that the market was very concentrated. Given that during that time we grew by merger from a top 25 bank to a top 5 bank, the regulators always seemed to see it our way.

 

[Helios]

Would this be bad for the consumer? As an owner in both systems, I think it could be good if the systems get merged like the Marriott/SPG Hotel...more choices...

 

[dioxide45]

Would this be bad for the consumer? As an owner in both systems, I think it could be good if the systems get merged like the Marriott/SPG Hotel...more choices...

You still have those choices today without a merged company. The problem with a merger is the costs of those choices. Just like consolidation in the airline industry, consolidation here probably can't be good either.

 

[JIMinNC]

Would this be bad for the consumer? As an owner in both systems, I think it could be good if the systems get merged like the Marriott/SPG Hotel...more choices...

You still have those choices today without a merged company. The problem with a merger is the costs of those choices. Just like consolidation in the airline industry, consolidation here probably can't be good either.

Most mergers involve elements that can be better for consumers (economies of scale, synergies, stability, etc.) coupled with elements that can be bad (less competition, higher prices, etc.). That's the case even with airline mergers. While the mergers in the airline industry have certainly reduced competition and increased fares, most analysts believe that the industry is much better positioned now to weather economic downturns and avoid the disruptions and chaos that have plagued that business over the years with frequent bankruptcies and shutdowns. Similarly, in my old banking business, mergers have created large national institutions that can serve customers coast-to-coast when we move and travel, compete effectively with the large international banks, and serve the needs of the largest companies. But those same big banks, by their sheer size, pose greater risks to the economy and financial system, as we saw in 2008.

 

[nuwermj]

I think it would depend on how the DOJ defined the "market". If they define it as you suggest as all timeshares, then you are 100% correct, there is very little concentration in that very fragmented business. If, on the other hand, the market were defined as all hotel-branded timeshares, the concentration ratio would likely look very different. I'm sure if ILG and MVW ever do decide to follow FrontFour's urging and merge, they would focus their arguments on the entirety of the timeshare market, but opponents would focus on the hotel-branded timeshare market. DOJ would have to sort it out.

The industry players seem to define their market as all timeshares. Below are statements from annual 10-K financial reports submitted to the SEC. The hotel-branded timeshares and the others seem to be lumped together into the same market.

Wyndham Vacation Ownership:
"The vacation ownership industry is highly competitive and is comprised of a number of companies specializing primarily in sales and marketing, consumer financing, property management and development of vacation ownership properties."

Bluegreen:
"Major companies that now operate or are developing or planning to develop vacation ownership resorts directly or through subsidiaries include Marriott Vacations Worldwide Corporation, the Walt Disney Company, Hilton, Wyndham, ILG and Diamond Resorts International. Bluegreen also competes with numerous other smaller owners and operators of vacation ownership resorts."

Diamond Resorts:
"In our Vacation Interests sales and financing segment, we compete for prospects, sales leads and sales personnel from established, highly visible vacation ownership resort operators, as well as a fragmented array of smaller operators and owners. In marketing and selling VOIs, we compete against not only vacation ownership companies, but also the vacation ownership divisions of other hospitality companies. Our competitors include Bluegreen Corporation, Hilton Hotels Corporation, Marriott Vacations Worldwide Corporation, Vistana Signature Experiences, Inc. and Wyndham Worldwide Corporation. In addition, in certain markets, we compete with many established companies focused primarily on vacation ownership, and it is possible that other potential competitors may develop properties near our current resort locations and thus compete with us in the future."

Hilton Grand Vacation:
"Our primary competitors in the timeshare space include Marriott Vacations Worldwide, Wyndham Vacation Ownership, Vistana Signature Experiences, Disney Vacation Club, Hyatt Vacation Ownership, Holiday Inn Club Vacations, Bluegreen Vacations and Diamond Resorts International."

ILG:
"Principal competitors of Vistana and Hyatt Vacation Ownership in the sale of vacation ownership products include Diamond Resorts, Disney Vacation Club, Hilton Grand Vacations Club, Marriott Vacation Club Worldwide, and Wyndham Vacation Ownership. A number of the competitors in this business are larger with greater resources, distribution platforms, sales capabilities and access to capital for new projects than our business."

Marriott Vacations Worldwide:
"Our competitors in the vacation ownership industry range from small vacation ownership companies to large branded hotel companies that operate vacation ownership businesses. In North America and the Caribbean, we typically compete with companies that sell upscale tier vacation ownership products under a lodging or entertainment brand umbrella, such as Starwood Vacation Ownership (which includes the Westin and Sheraton brands), Hilton Grand Vacations Club, Hyatt Vacation Club, and Disney Vacation Club, as well as numerous regional vacation ownership operators."

 

[Helios]

You still have those choices today without a merged company. The problem with a merger is the costs of those choices. Just like consolidation in the airline industry, consolidation here probably can't be good either.

I see that. In general, fewer choices means the supply side gets to set prices and can abuse (take advantage as much as the demand yields).

But, how about if all Marriott and Vistana properties are part of a single/seamless system. Say there is a conversion from SOs to DVC points (same as SPG to MR seamless 3:1 conversion concept). SO to DVC would have to be a different ratio in the other direction, say 25:1 (for discussion say HAR Plat+ 2BRLO to MKO High Season 2BRMK). That flexibility is not there now. Or, am I missing something? I know you can do II but that is not the same.