Wyndham Worldwide Corporation
) Vacation Ownership business recently took over privately held
Shell Vacations LLC (Shell) and its subsidiaries for $102 million
in cash. The deal affirms management's intent to solidify its
presence in the domestic vacation ownership business. However, the
acquisition assumes $153 million of Shell's debt.
MARRIOT VAC WW (VAC): Free Stock Analysis
WYNDHAM WORLDWD (WYN): Free Stock Analysis
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Per the deal, Wyndham Vacation Ownership (WVO) will be in charge of
the property management operations at 19 Shell resort locations
spread across Hawaii, California, Arizona, Nevada, Oregon,
Wisconsin, Texas, New Hampshire and Canada.
The deal also paves the way for WVO to operate Shell Vacations Club
(SVC) - a renowned points-based reservation and exchange system
offering various benefits and travel options to members.
Wyndham is a dominant player in the vacation ownership business and
seeks further inorganic growth. Under the Vacation Ownership
business it develops, markets and sells vacation ownership
interests as well as provides consumer financing to owners via its
network of over 160 vacation ownership resorts serving over 813,000
owners throughout North America, the Caribbean and the South
This fee-for-service business reduces the capital requirement,
resulting in a higher free cash flow. Management at Wyndham
believes that this latest bolt-on acquisition will be accretive to
earnings instantly and will aid cash flow generation. The deal is
in sync with Wyndham's strategy to grow through geographical
diversification in the domestic arena.
We view the recent deal as strategically positive. While Shell will
enjoy the much higher scale of WVO business, Wyndham will benefit
from Shell Vacations' rich positioning in the hospitality industry
over more than four decades. Further, its extremely popular
vacation club providing almost unmatchable customer satisfaction
makes it a lucrative target for acquisition.
We believe that Wyndham's repositioning as a more fee-for-service
based business will benefit it over the long term. Wyndham, which
competes with the likes of
Marriott Vacations Worldwide Corp.
), currently carries a Zacks #3 Rank that translates into a
short-term Hold rating. We are also maintaining our long-term
Neutral recommendation on the stock.