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Mergers and acquisitions continue in the timeshare industry, and the most recent involves Diamond Resorts International Incorporated. On June 29th, private equity firm Apollo Global Management announced a $2.2 billion agreement to acquire Diamond and its network of 420 properties in 35 countries. Win-Win for Both Companies
The deal appears to be a win-win for both Apollo and Diamond. Following the announcement, Apollo’s stock rose 23.7% to $29.79. Apollo has been on an acquisition spree this year of more than $1 billion, buying among other entities, the grocer Fresh Market, Incorporated. Apollo's hospitality interests currently include a large amount of stock in Caesar's Entertainment Corporation and Norwegian Cruise Line. Last year, Apollo sold its Great Wolf Resorts to Centerbridge Partners LP.
The all-cash agreement valued Diamond at $30.25 per share, a 26% premium over its Tuesday closing price. It's a strong testament to the business acumen of Stephen Cloobeck, Diamond's founder and chairman, who owns about a quarter of the company's stock. His shares rose by $60 million after the announcement. Cloobeck created Diamond in 2007 and is credited with coming up with Diamond's unique points-based system which allows customers to buy points to use in several select vacation destinations. Under his direction, Diamond’s annual revenue rose from $371 million in 2010 to $954 million in 2015. Said Apollo partner David Palmer:
"The management team and Diamond's more than 8,000 team members have built an amazing customer-centric business with a great reputation that delivers award-winning hospitality experiences at great value."
Even More Deals
The Diamond/Apollo deal follows this year's industry trend of mergers and acquisitions beginning with the merger of Starwood with Marriott. Starwood sold Vistana Signature Experiences, its timeshare business, to timeshare and exchange business Interval Leisure Group for $1.5 billion. Diamond acquired Intrawest Resort Club Group for $85 million. Just last Wednesday, Hilton Worldwide Holdings Incorporated announced that it filed with the U.S. Securities and Exchange Commission to spin off its timeshare business, Hilton Grand Vacations, into a publically-traded company.
Is the Industry Changing?
ARDA's "2015 edition of the State of the U.S. Vacation Timeshare Industry" may have some of the answers to that question. The report gives proof that the industry is thriving. Sales volume increased almost 25% since 2010 with an average annual growth of 6%. ARDA's results for 2015 are expected soon, and President and CEO Howard says the year 2014 shows the fifth consecutive year of sales increases in the industry. Reported sales grew by 4% to $7.9 billion in total sales in North America.
Strong Growth Motivates
The healthy growth seems to be motivating big players such as Marriott Vacation Club, Breckenridge Grand Vacations and Welk Resorts to add new properties, and to bring new entrants into the market such as U.S. based Tropicana Entertainment. According to an article in Hotel Interactive, "Transformative Timeshare Market", other influences on market growth could include the move into different markets such as the urban market, new and different travel opportunities such as experiential travel, the changing demographics of the timeshare buyer and the willingness of companies to cater to their needs. Whatever the reason for the current state of the industry, it's all good right now!
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