Hilton Grand Vacations, a global timeshare company, has agreed to buy Diamond Resorts in a stock deal worth $1.4 billion from Apollo Global Management, an investment manager. The acquisition expands the company’s reach to over 20 new markets.
According to the terms of the deal, Hilton Grand Vacations (HGV) will grant 34.5 million shares of common stock to the Apollo Funds and other Diamond stockholders, including the Reverence Funds. The transaction, which awaits certain regulatory approvals, is expected to close in the summer of this year.
Upon closure of the deal, Hilton Grand Vacations expects to record run-rate cost synergies of $125 million, to be realized in the first 24 months. The deal is expected to be accretive to adjusted free cash flow per share within the first 12 months.
The combined entity will be 72% owned by existing shareholders of Hilton Grand Vacations and the remaining 28% will be owned by Apollo (APO) Funds.
The combination of Hilton Grand Vacations’ strong brand and culture with Diamond, the largest independent timeshare operator, will create the premier vacation ownership company with the broadest offering in the industry, the company said.
Hilton Grand Vacations CEO Mark Wang commented, “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.” (See Hilton Grand Vacations stock analysis on TipRanks)
On March 5, Truist Financial analyst Patrick Scholes increased the stock’s price target to $48 (19.2% upside potential) from $36 and maintained a Buy rating “as part of a broader research note on Timeshares.”
The analyst “is positive on the sector amid green shoots being observed in Leisure travel along with rapid improvement in balance sheets.” Scholes added, “Valuations in this group do not look stretched relative to historical levels.”
Shares have rallied more than 119% over the past year, while Wall Street analysts are still bullish about the stock. The Strong Buy consensus rating boasts 3 unanimous Buys. Looking ahead, the average analyst price target stands at $46, putting the upside potential at about 14.2% over the next 12 months.
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