Starwood decision expected within 60 days
29 OCTOBER 2015 8:31 AM
Starwood Hotels & Resorts Worldwide CEO on an interim basis Adam Aron said he expects a resolution to the company’s review of strategic alternatives before the end of 2015.
STAMFORD, Connecticut—Amid reports of various companies vying for the right to buy Starwood Hotels & Resorts Worldwide, officials at that company laid out a rough timeline for the strategic review that initially sparked speculation of an impending sale.
During a third-quarter earnings call with financial analysts on Wednesday afternoon, CEO on an interim basis Adam Aron said that resolution to the company’s review of strategic and financial alternatives could be nearing.
“Our progress and our process is active and nearing conclusion,” Aron said. “I’d be surprised if we don’t have answers to these questions by the end of the year.”
Aron later clarified that statement, if only slightly, by noting he didn’t believe the search for strategic alternatives or the search for a new CEO would last any longer than 60 days.
Starwood officials opted not to comment on specific news reports, including a Wall Street Journal story that Shanghai Jin Jiang International Hotels and a group of other Chinese companies are each angling to bid on Starwood. Executives also didn’t comment on CNBC’s reports that Hyatt Hotels Corporation is the front runner to purchase Starwood, opting for a cash and stock sale that would leave Hyatt officials in charge of the newly merged companies.
“You’ll note that those are conflicting press reports,” Aron said. “And it really is not the time for us publicly to dissect the nuances of the processes or where we are in the processes because the minute we have news to share with you, we will share it with you.”
The reports of a possible buy pushed up Starwood’s stocks Tuesday and Wednesday. Stocks spiked 16% over that two-day span, reaching $79.50 per share. Starwood’s stock is still down 2.6% year to date as of press time, while the Baird/STR Hotel Stock Index is down 13.8%.
New brand partnership
Starwood officials also said during the call that they have plans to announce a new brand at some point in “a few weeks.”
“We expect to finalize actions in November that consumers will see an 11th Starwood brand through a marketing partnership with Design Hotels,” Aron said. “This will fill a special niche in Starwood’s portfolio, incorporating a handpicked collection of independently owned smaller properties committed to individuality, progressive design and cultural authenticity.”
Aron specifically mentioned some of Design’s properties: The Gramercy Park Hotel in New York City, the Ion Luxury Adventure Hotel in Iceland and the C-Hotel in Lake Como, Italy.
This announcement comes just seven months after Starwood announced the creation of its Tribute Portfolio soft brand.
Selling off timeshares
Starwood officials also announced a finalized agreement Wednesday to sell off its vacation ownership business, valued at $1.5 billion, to Interval Leisure Group. Starwood will spin off that portion of the business, Vistana Signature Experiences, before merging operations with ILG.
Starwood shareholders will hold 55% of the combined business on a fully diluted basis with existing ILD shareholders owning the remaining 45%.
Vistana manages and markets 22 resorts with 220,000 owners.
Starwood officials reported adjusted earnings before interest, taxes, depreciation, and amortization of $294 million for the third quarter of 2015. Revenue per available room increased 5.4% worldwide in constant dollars, but decreased 0.3% in actual dollars year over year.
The company saw a 3.1% increase in management and franchise fees compared to the third quarter of 2014. Income from continuing operations was $88 million, down from $109 million in the prior-year quarter. Income without special items was $125 million.
Starwood signed 44 management and franchise contracts in the quarter, encompassing 8,600 rooms. During the quarter, the company opened 27 hotels and resorts comprising about 4,800 rooms.