Marriott Vacations Worldwide agreed to buy ILG for about $4.7 billion in a stock and cash deal, creating the largest luxury brand for timeshare vacation resorts.
ILG investors will receive $14.75 in cash and 0.165 of Marriott Vacations (VAC) common stock for each of their shares, the companies said in a statement Monday. The deal represents a premium of about 13%, based on the two companies’ closing share prices on Friday. The purchase is expected to result in $75 million of annual savings within two years.
ILG (IILG) had been facing activist pressure since last year to merge with a competitor. Last May, FrontFour Capital disclosed a 2% position in Miami-based ILG and simultaneously urged it to combine with Marriott Vacations. The firm in January nominated four directors to ILG’s board ahead of its annual meeting in May. In February, in a public letter, the activist again urged the board to engage in good faith discussions with Marriott Vacations. FrontFour said that refusal to “entertain such a compelling transaction” would “call into question the existing board’s ability to satisfy its fiduciary duties.”
The combined firm will have revenue of $2.9 billion and own more than 100 vacation properties around the world. It also will have exclusive access to the Marriott International and Hyatt Hotels loyalty programs for vacation ownership.
For shareholders, the deal “provides them with immediate and compelling cash value and the opportunity to meaningfully participate in the long-term growth potential of a powerful combined company,” ILG Chief Executive Officer Craig Nash said in the statement. “The strategic rationale for this transaction is clear. Combining these two highly complementary businesses will create an industry leader with enhanced scale and a broader product portfolio that will have great benefits for our members, owners and guests.”
The purchase is expected to add to earnings per share within the first full year after the transaction closes, scheduled for the second half of the year, executives said on a conference call Monday. The transaction must be approved by ILG and Marriott Vacations shareholders.
The combined company will be the global licensee of seven upper-upscale and luxury vacation brands using the Marriott, Ritz-Carlton, Sheraton, Westin, St. Regis and Hyatt names.
JPMorgan Chase & Co. is the financial adviser to Marriott Vacations, and Goldman Sachs Group Inc. and Moelis & Co. are advising ILG.