Wyndham Worldwide Corporation has announced an agreement to sell its European vacation rental business to Platinum Equity for around $1.3 billion.

The European vacation rental business has entered into a 20-year agreement under which it will pay a royalty fee of 1% of net revenue to Wyndham’s hotel business for the right to use the ‘by Wyndham Vacation Rentals’ brand.

The transaction is expected to close in the second quarter of 2018.

Wyndham’s European vacation rental business features more than 110,000 properties in over 600 destinations across more than 25 countries. It will continue to feature in the Wyndham Rewards loyalty programme following the deal.

It operates more than two dozen local brands, including cottages.com, James Villa Holidays, Landal GreenParks, Novasol and Hoseasons and generates around $750 million in annual revenue and approximately $130 million of pre-tax profits including allocated costs.

In August 2017, Wyndham Worldwide announced the planned separation of its hotel business from its vacation ownership and timeshare exchange businesses.

Stephen P. Holmes, chairman and chief executive of Wyndham Worldwide said: “This is another important step in the evolution of our company.

“Our European vacation rental brands deliver a great consumer experience, have high brand recognition in their markets and have delivered strong, consistent results. Our goal has always been to position them for continued long-term growth.

“We conducted a rigorous strategic review process that generated strong interest from multiple parties, and we were pleased to find the right buyer. We are confident that as part of Platinum Equity’s portfolio, these businesses will have a bright future and will provide significant opportunities for their associates and business partners.”

Geoff Cowley, managing director of Wyndham Vacation Rentals UK, said: “WVR UK is proud to have been part of the Wyndham family. At the same time, we are excited to move into Platinum Equity ownership upon the successful completion of the sale.

“We are confident Platinum Equity will provide our business with a positive outlook for growth and will enable us to continue delivering the same exceptional service to our accommodation owners and their guests. In the meantime, we are continuing to focus on delivering outstanding holidays and great service for all our partners throughout 2018.”

Global private equity firm Platinum Equity has acquiring and operated businesses that have been part of large corporate entities for 20 years.

Partner Louis Samson said: “We have worked closely with Wyndham Worldwide to craft a divestiture solution that creates value for all sides and puts the European vacation rental business on a path for long-term success as a standalone business.

“We are excited to partner with the management team to ensure a seamless transition while preparing our plans to drive additional growth, both organically and through prospective add-on acquisitions.”

The firm’s current portfolio companies employ more than 16,000 people in Europe. The proposed acquisition of Wyndham’s European vacation rental business represents Platinum Equity’s second European investment since the fourth quarter of 2017, when it acquired Pattonair.

Tax obligations associated with the sale are expected to be less than 15% of the proceeds. Wyndham expects to use the net proceeds from the sale for general corporate purposes, which could include debt repayment and/or funding of its recently-acquired La Quinta Holdings’ hotel franchising and management businesses.

Wyndham Worldwide also says its “planned spin-off” of Wyndham Hotel Group remains on track for roll out in the second quarter of 2018.

In a fourth quarter and full year trading announcement issued on Wednesday morning Wyndham classified its European rentals business as a “discontinued operation” as the sale was imminent.

The European rentals arm of Wyndham includes James Villas, cottages.com and Hoseasons and offers more than 30,000 holiday properties for rent in the UK.

In August last year parent company Wyndham Worldwide said it was exploring “strategic alternatives” for its European rental brands after spinning off its hotel division.

This prompted speculation that the division was being put up for sale and a succession of private equity investors including CVC Capital Partners and Blackstone and even home sharing platform Airbnb were touted as possible buyers.

The Sunday Times reported last month that Airbnb’s interest had waned and it had not advanced to the next stage of bidding.

The spin off in August saw the formation two separately trading entities; Ramada and Days Inn parent Wyndham Hotel Group based in New Jersey and Wyndham Vacation Ownership headquartered in Orlando, Florida.

At the time Stephen P. Holmes, chairman and chief executive of Wyndham Worldwide, said:

“After a comprehensive review process, the board of directors has determined that a spin-off of the hotel business and the combination of Wyndham Vacation Ownership with RCI is the best structure to unlock shareholder value and enable strong growth across the businesses.

“We will work with the leadership of our European rental organisations, which have outstanding brands in their regional markets, to explore options to fully realize their future growth potential.”

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