After a disappointing second quarter for Hilton Grand Vacations (HGV), repeated reports surfaced of a buyout of the company. Interested parties named include: private equity firm Apollo Global Management, who owns Diamond Resorts, and Blackstone Group, one of the largest alternative investment firms in the world.
August News
In August, HGV earnings continued to disappoint with shares down more than 10%. After that announcement, the New York Post reported that Apollo made an offer to acquire HGV which included 3 options: a purchase of HGV at a premium to its share price, a merger with Apollo’s Diamond Resorts, or a tender offer of HGV shares at a premium to the current HGV share price, potentially $36 per share.
September News
Shortly after Apollo’s offer, acquisition interest from other private equity firms followed. HGV said they would explore these options and hire an investment bank to advise them and then accept bids starting in late September. When that bit of news came out, HGV shares jumped as much as 8.5% and were trading up 3.5% at $33.51.
October News
October brought no definitive word on a buyout. However, after trading on October 14, Bloomberg reported that Apollo Global Management upped their August offer to buy HGV to $40 a share—a 23% premium to that week’s Friday closing price of $32.64 a share. The same report said Blackstone Group has also made an offer. Shareholders report skepticism about believing every report that comes their way.
Future Perspectives
As rumors continue, there’s speculation about the buyout’s ultimate effect on the vacation industry as a whole. The potential buyout arrives at a time when the timeshare vacation industry is experiencing change as new timeshare owners are younger, more affluent, and have more demands. The industry is trying to distance itself from a past of locking customers into complex contracts and to increase occupancy rates by improved offerings that make timeshare a popular alternative to typical vacations.
As a comparison, think about when Marriott bought Starwood. That buyout brought many more choices for owners. But, with more people making reservations, it also made it harder to book popular vacation locations.
