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Marriott Vacations (VAC) Plans to Acquire Welk Resorts for $430M

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Marriott Vacations Worldwide Corporation (VAC - Free Report) recently entered into a definitive agreement with Welk Resorts to acquire Welk-branded portfolio of vacation resorts, programs and property management contracts for approximately $430 million. However, the transaction is subject to regulatory approvals and is likely to close by the second quarter of 2021.

Following the transaction, the company intends to integrate and rebrand the Welk Resorts properties in California, Colorado, Missouri, New Mexico and Cabo San Lucas, Mexico as Hyatt Residence Club resorts. It is subject to final approval from Hyatt Hotels Corporation (H - Free Report) .

Notably, the buyout is likely to boost Hyatt Residence Club's footprint by 50%. Also, the company expects a 90% surge in number of keys.

In this regard, Stephen P. Weisz, chief executive officer of Marriott Vacations, stated, "The acquisition will expand Hyatt Residence Club's geographic presence while providing substantial future growth opportunities. By leveraging our high-value marketing and sales channels and leveraging more efficient rental distribution channels, we expect to be able to drive higher contract sales and expand margins."

Cost Synergies From Acquisition

Before the pandemic, the company was on track to deliver run-rate synergy savings of $125 million by 2021-end. However, with the coronavirus-induced disruptions, the company has increased focus on ways to drive more synergies and other cost savings. Marriott Vacations raised its synergy and cost-saving target by $75 million to $200 million.

Case in point (Upon Integration), Marriott Vacations is likely to improve margins for the Welk business by replacing high-cost marketing with efficient branded channels. It also expects to achieve cost savings and other revenue enhancements (including improved rental margins) by leveraging Hyatt's global distribution.

Moreover, Welk has more than three years of built inventory along with co-located land to support future growth. This is likely to boost Marriott Vacations’ future prospects.

In the past six months, shares of Marriot Vacations have gained 55.6% compared with the industry’s 36.9% growth.

Marriott Vacations, which shares space with Choice Hotels (CHH - Free Report) , and Hilton Worldwide Holdings Inc. (HLT - Free Report) in the Zacks Hotels and Motels industry, currently carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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