Hilton Grand Vacations Acquires Diamond Resorts

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Hilton Grand Vacations, with 62 properties, yesterday reached an agreement to acquire Diamond Resorts with 92 leisure resorts.

Hilton Grand Vacations (HGV) was part of Hilton until 2019, when it was spun off as a separate entity. HGV properties appear on property search on Hilton’s website, and you can both earn and redeem points for HGV stays and receive limited elite benefits.

You can access Hilton here and Hilton Grand Vacations here.

READ MORE: Hilton Honors Rate & Bonus Points And Miles Promotions

Here’s an infographic from HGV:

A reminder of elite benefits at HGV:

Here’s the announcement from Hilton Grand Vacations:

Hilton Grand Vacations to Acquire Diamond Resorts, Creating the Premier Leisure Operator With the Broadest Offering in the Vacation Ownership Industry

Combines largest independent timeshare company with the strength of Hilton Grand Vacations’ brand and culture

Generates over $125 million in run-rate cost synergies, expected to be achieved in the first 24 months following close

Expands and diversifies HGV’s resort portfolio into over 20 new markets, adding additional drive-to destinations & sales centers while enhancing alignment with the Hilton network to widen customer reach

ORLANDO, Fla. (March 10, 2021) – Hilton Grand Vacations Inc. (NYSE:HGV) (“HGV” or “the Company”) today announced that it has entered into a definitive agreement to acquire Diamond Resorts International, Inc. (“Diamond”) from funds (the “Apollo Funds”) managed by affiliates of Apollo Global Management, Inc. (NYSE:APO) (together with its consolidated subsidiaries, “Apollo”), funds managed by affiliates of Reverence Capital Partners (“Reverence”), and other Diamond stockholders, in a stock-based transaction with an equity value of approximately $1.4 billion. Under the terms of the agreement, the Apollo Funds and other Diamond stockholders will receive 34.5 million shares of HGV common stock, subject to customary adjustments.

The acquisition will combine the strength of HGV’s brand and culture with Diamond, the largest independent timeshare operator. Diamond’s 92 leisure resorts and nearly 400,000 owners uniquely complement HGV’s 62 upscale and luxury properties and over 325,000 owners, and the combination will create the premier vacation ownership company with the broadest offering in the industry.

“I’m excited to announce our transformational agreement to add Diamond Resorts to the Hilton Grand Vacations family, accelerating our next phase of growth,” said Mark Wang, president and CEO of Hilton Grand Vacations. “This strategic combination will leverage the strengths of each company, positioning us to drive significant Net Owner Growth while enhancing efficiencies of scale and generating significant shareholder value. Diamond’s extensive regional, drive-to network of resorts and expanded demographics uniquely complement HGV’s best-in-class lead generation, world-class hospitality, and premier destinations backed by the strength of the Hilton brand. For our valued team members, owners and guests, this combination creates new opportunities to provide exciting destinations and memorable vacation experiences while continuing to provide exceptional levels of service.”

Transaction Highlights

Enables significant value creation from scale: combines the largest independent timeshare company with Hilton Grand Vacations’ strong brand and culture

o Expands and diversifies HGV’s resort portfolio into over 20 new markets.

o The combined company will have 720,000 owners, 154 resorts and 48 sales centers.

Diversifies HGV’s portfolio: adds additional drive-to destinations and allows HGV to leverage the Hilton network to widen customer reach

o Doubles the number of vacation options for the combined owner base.

o Diamond’s complementary footprint will bolster HGV’s strong network of beach, attraction-based, and urban markets, while adding new regional drive-to destinations in outdoor, desert and ski locations.

o Broader range of pricing and product options will widen customer reach, enhancing alignment with the 112 million Hilton Honors members.

Accelerates launch of HGV-branded trust product offering: rebrand Diamond’s properties over time to drive revenue growth in a new customer segment

o Combining HGV’s points-based deeded product with Diamond’s points-based trust structure will allow the Company to cater to a wider audience, attract more new buyers and drive incremental growth in a capital-efficient manner.

o HGV’s deeded product provides premium pricing, inventory sourcing flexibility, and the ability to pre-sell projects to support strong project-level cash flow, while giving buyers and owners the value of guaranteed availability.

o The introduction of a trust product allows for lower barriers to ownership, reduced inventory delivery volatility and inventory recycling, enabling smoother sales and upgrades while providing buyers and owners network and pricing flexibility.

o Integrates Diamond’s innovative Events of a Lifetime® experiential sales and marketing platform that drives strong engagement and Volume Per Guest (VPG) premiums with HGV’s owner base.

● Generates over $125 million in run-rate cost synergies, expected to be achieved in the first 24 months following close

o Significant future revenue synergy opportunities.

Increases recurring EBITDA streams and drives overall cash flow, with adjusted free cash flow per share accretion in year one2

o The combined company is expected to generate steady-state adjusted free cash flow conversion of 50-60%, driven by its realization of cost synergies, significant inventory pipeline, acquired inventory and reduced long-term inventory spending.

o Adding new owners embeds additional value for the company over the life of their ownership. o The combined company is anticipated to generate approximately 50% of Segment Adjusted

EBITDA from recurring sources, including club membership fees, property management fees and financing fees.

Compelling valuation and deal structure facilitate financial flexibility and deleveraging

o Significant cash flow generation is expected to allow for rapid deleverage, returning to below 3.0x within 24 months.

o Pro-forma liquidity of $1.0 billion at year-end 2020.

Conclusion

Buying into these timeshare deals make very little sense, and you can usually acquire one, if you absolutely want, on a resale market at pennies on the dollar, or the owner may even pay you to get the unit with usually very high yearly fees off their hands.

This deal, however, will eventually increase the number of HGV properties where Honors members can earn and redeem their points while earning elite nights and stay credits.

You often receive emails for free or very inexpensive stays with some bonus points thrown in to visit these HGV properties.  There is nothing wrong with taking advantage of them, but remember to say absolutely no during the sales presentation, sometimes high pressure, you need to attend.

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