Against the backdrop of a soft opening on Wall Street Monday, shares of vacation specialist Bluegreen Vacations (NYSE:BVH) are lighting up the sky and soaring to triple-digit percentage gains. Undergirding sentiment is rival Hilton Grand Vacations (NYSE:HGV). At least part of the upside in BVH stock today may stem from some impeccable timing amid sector-wide challenges.
According to a press release, Bluegreen has announced a definitive agreement in which Hilton Grand Vacations will acquire the company in an all-cash transaction. Under the terms, the transaction implies a total enterprise value of “approximately $1.5 billion, inclusive of net debt.” Furthermore, shareholders of BVH stock will receive $75 in cash for each share of Bluegreen’s Class A and Class B common stock that they hold at the closing of the merger.
Recognized as a leading vacation ownership company, Bluegreen has 49 club resorts and 24 associate resorts. Per the release, the company “develops, markets, and operates a system of high-quality vacation ownership resorts in selected vacation destinations such as Orlando, Panama City Beach, Las Vegas, the Smoky Mountains, Myrtle Beach, Charleston, the Branson, Missouri area, Nashville and New Orleans, among others.”
Following the disclosure, Bluegreen Chairman and CEO Alan Levan emphasized that combining with Hilton Grand Vacations will “create an even more compelling vacation ownership offering.”
BVH Stock May Have Left on a High Note
Even without the dramatic lift in BVH stock today, Bluegreen appeared to be headed for a positive return in the market. Thanks to the fading of the Covid-19 pandemic and the rise of “revenge travel,” Bluegreen has benefited handsomely.
Unfortunately, though some signs indicate that the broader travel industry may now be fading. Last month, a CNBC report indicated that travel intentions in several countries — particularly in Europe — have flatlined or declined. That’s not surprising given Europe’s economic pressures, a headwind with which other regions can sympathize — and that might have translated into potential problems for BVH stock, had this acquisition not occurred.
Interestingly, on the flip side of the coin, shares of Hilton Grand are stumbling more than 7% on Monday. Worse yet, in the trailing six months, HGV stock has dipped about 19%. To be sure, Hilton Grand recently disappointed investors with its third-quarter earnings report, posting per-share profits and revenue that fell conspicuously year-over-year (YOY). Quarterly revenue missed analysts’ consensus view while EPS beat analysts’ per-share earnings target.
Still, the fact that Hilton’s Q3 financials slipped points to possible pressure in the wider vacation industry. That may help explain why BVH stock is skyrocketing today, with the timing of the deal coming just ahead of potential troubles.
Why It Matters
On Oct. 19, Truist Financial reiterated its “buy” rating for BVH stock with a $54 price target. Meanwhile, for HGV stock, analysts currently rate shares a strong buy with a $57.50 average price target, implying over 66% upside.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
