Diamond Resorts International has long had a dense inside ownership along with low trading multiple, look at these facts along with thir previously announced “strategic review” and they look a probable candidate to go private.
A source following the strategic review closely said,
“The insiders own a tremendous amount of stock, they’ve LBO’ed it before, [and] the company generates a tremendous amount of cash flow,” adding that around 25% of Diamond’s stock is owned by the organisation while private equity firms Guggenheim Capital and Wellington Management Company own 13.18% and 13.99% stakes, respectively, as of 31st December 2015 and it is worthwhile to note that Guggenheim Capital also participated in the original Diamond buyout and also has a seat on Diamond’s board.
The timeshare company, DRI, announced on the 24th February, that it had retained Centerview Partners to explore strategic changes.
The source believes DRI could be taken private for $32 to $35 per share, the total deal value would be between $2.23 billion to $2.44 billion, Diamond shares closed at $21.22 per share in March 2016.
These forecasted have come following Starwood Hotels and Resorts Worldwide’s $1.5 billion sale of its timeshare business, Vistana Signature Experiences, to Diamond rival Interval Leisure Group.
“Starwood’s deal to sell their business to Interval was 10 times Ebitda,” the source said. “I think the comps could support even a $45 price, but they probably don’t need to pay that. When the stock was $25 they termed their shares ‘materially undervalued’ so it’s hard to fathom them going that high.”
The source anticipates the strategic review will be completed in May / June 2016.
Analysts agreed that Diamond is an improbable strategic target, due to its low trading power, and is more likely a target for private equity.
“Diamond trades at a very low multiple relative to its trading history and relative to where peers currently trade,” said Whitney Stevenson of JMP Securities. “There’s the opportunity to pick up a high-growth timeshare company at a very inexpensive multiple… but I find it difficult to see them as a strategic target by another public timeshare company.”
Gregg Klein of Imperial Capital contended that of all the potential strategic buyers,Wyndham Worldwide, WYN, would make the most sense as a likely purchaser, but “Wyndham said in their last in their last earnings call that they’re not interested” in timeshare acquisitions.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk