By Aatreyee Dasgupta and Kannaki Deka
(Reuters) -Vacation property operator Hilton Grand Vacations (NYSE:HGV) said on Monday it would buy peer Bluegreen Vacations (NYSE:BXG) in a $1.5 billion deal including debt, to attract younger customers for its timeshare properties and expand offerings.
Under the deal terms, shareholders of Bluegreen Vacations will receive $75 in cash for each share held, more than double the stock's closing price on Friday, valuing the company at $1.28 billion.
High inflation has begun to weigh on domestic travel in the United States, following a surge in demand when COVID-related lockdowns were lifted.
"Our board voted unanimously for the approval of this deal," Mark Wang, chief executive of Hilton Grand Vacations, told Reuters in an interview. "Bluegreen really is the last what we would call quality strategic opportunity in our space."
Both Hilton Grand and Bluegreen Vacations market and sell timeshares, or vacation ownership interests - a model where multiple owners have exclusive use of a property for a period of time.
Shares of Bluegreen Vacations shot up 110% to close at $73.45 on Monday, while Hilton Grand stock closed 8% lower at $34.25.
The deal is expected to close during the first half of 2024 and will increase Hilton Grand's membership base to more than 740,000, from more than 525,000, and its resort portfolio from 150 to nearly 200 properties, Hilton Grand Vacations said.
Approximately 75% of Bluegreen Vacations' customer-owners are Generation X, many of which are in their 40s to 50s, or younger, said Wang.
"We're excited that we're going to be able to track a solid customer at an earlier stage in their life," he said.
It will also expand Hilton's presence along the U.S. East Coast while adding a number of outdoor and ski destinations.
Hilton Grand, which was spun off into a publicly traded company in 2017, also said it had signed an exclusive 10-year marketing agreement with outdoor retailer Bass Pro Shops.
"One of the major challenges with an independent Vacation Ownership company like BVH is that they do not have a well-recognized brand like HGV (Hilton) does and subsequently customer acquisition cost is significantly higher," said Truist Securities analysts in a note.
Separately, the company cut its 2023 adjusted core earnings forecast to between $1 billion and $1.02 billion, from a previous forecast of $1.09 billion to $1.12 billion.
Credit Suisse Securities and Wells Fargo are acting as financial advisers to Bluegreen Vacations, and BofA Securities is acting as the exclusive financial advisor for Hilton Grand Vacations.