Wyndham Worldwide Corp. signed a definitive agreement to divest its European vacation rental business to global private equity firm Platinum Equity for approximately $1.3 billion.
Platinum, which was reported to be in late-stage discussions for the hospitality company's subsidiary, will gain ownership of more than 110,000 units across more than 600 destinations through the transaction. The vacation rental business generates roughly $750 million in annual revenue and operates more than 24 local brands, including James Villa Holidays, Landal GreenParks and Novasol.
The business, which has operations in more than 25 countries, additionally agreed to pay a royalty fee equating to 1% of net revenue to Wyndham's hotel business under a 20-year contract. The contract gives the entity the right to use the hotel business's "by Wyndham Vacation Rentals®" endorser brand.
Wyndham Worldwide, which announced intentions to separate its hotel business from its vacation ownership and timeshare exchange businesses in August 2017, expects to close the deal in the second quarter. The transaction is pending customary closing conditions, including works council consultation.
The company expects tax obligations associated with the sale of the European rental brands to be less than 15% of the proceeds.
Net proceeds from the sale will be deployed for use in general corporate purposes that may include debt repayment and/or funding of the acquisition of La Quinta Holdings Inc.'s hotel franchising and management businesses.
Wyndham Worldwide's planned spinoff of Wyndham Hotel Group is on schedule for an expected distribution in the second quarter of 2018.
Deutsche Bank and Goldman Sachs are acting as financial advisers, and Kirkland & Ellis International LLP and Dechert LLP are legal advisers to Wyndham Worldwide. Bank of America Merrill Lynch will lead the acquisition's financing on behalf of Platinum, and Latham & Watkins is serving as its legal counsel.