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ACQUISITIONS | 9 Months Ended
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Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
ACQUISITIONS | ACQUISITIONS Bluegreen Acquisition On January 17, 2024, we completed the Bluegreen Acquisition in an all-cash transaction, with total consideration of approximately $1.6 billion. The Bluegreen Acquisition is expected to broaden HGV’s offerings, customer reach and sales locations. Costs related to the Bluegreen Acquisition were $25 million and $162 million during the three and nine months ended September 30, 2024. These costs were expensed as incurred and included within Acquisition and integration-related expense in our unaudited condensed consolidated statements of operations. The following table presents the preliminary fair value of each class of consideration transferred in relation to the Bluegreen Acquisition as of the Bluegreen Acquisition Date:
($ in millions, except share and per share data) |
Number of Class A shares issued and outstanding | 12,504,138
Number of Class B shares issued and outstanding | 3,664,117
Number of Class A shares deliverable as equity awards | 673,169
Total shares and related equity awards outstanding | 16,841,424
Cash consideration to Bluegreen shareholders and equity award holders per share | $ | 75.00 |
Purchase price | $ | 1,263 |
Repayment of Bluegreen debt(1) | 265 |
Payment of seller transaction fees(2) | 28 |
Total consideration transferred | $ | 1,556 |
(1) Reflects the balance of Bluegreen’s debt repaid by HGV. (2) Reflects transaction-related expenses incurred by Bluegreen but paid by HGV. Preliminary Fair Values of Assets Acquired, Liabilities Assumed and Noncontrolling Interest We accounted for the Bluegreen Acquisition as a business combination, which requires us to record the assets acquired, liabilities assumed and noncontrolling interest at fair value as of the Bluegreen Acquisition Date. The preliminary fair values of the assets acquired, liabilities assumed, and noncontrolling interest, which are presented in the table below, and the related preliminary acquisition accounting are based on management’s estimates and assumptions, as well as information compiled by management, including the books and records of Bluegreen. Our estimates and assumptions are subject to change during the measurement period, not to exceed one year from the Bluegreen Acquisition Date. The magnitude of the Bluegreen Acquisition could necessitate the need to use the full one-year measurement period to adequately analyze and assess a number of the factors used in establishing the asset, liability and noncontrolling interest fair values as of the Bluegreen Acquisition Date. The final values may also result in changes to amortization expense related to intangible assets and depreciation expense related to property and equipment, among other changes. Any potential adjustments made could be material in relation to the values presented in the table below. As discussed more fully below, the primary areas of the purchase price allocation that are not yet finalized include the following: (1) finalizing the review and valuation of acquired intangible assets (including key assumptions, inputs and estimates) and assigning the useful lives to such assets; (2) finalizing the review and valuation of acquired inventory, property and equipment (including key assumptions, inputs and estimates) and assigning the remaining useful lives to the depreciable assets; (3) finalizing the review and valuation of acquired timeshare financing receivables (including key assumptions, inputs and estimates); (4) finalizing the valuation of certain in-place contracts or contractual relationships (including but not limited to leases), including determining the appropriate amortization periods; (5) finalizing the review and valuation of other acquired assets, assumed liabilities, including debt assumed, and noncontrolling interest; and (6) finalizing our estimate of the impact of purchase accounting on deferred income tax liabilities.
($ in millions) | Preliminary Amounts Recognized as of the Bluegreen Acquisition Date
Assets acquired |
Cash and cash equivalents | $ | 71 |
Restricted cash | 44 |
Accounts receivable | 32 |
Timeshare financing receivables, net | 907 |
Inventory | 430 |
Property and equipment | 139 |
Investment in unconsolidated affiliates | 5 |
Operating lease right-of-use assets | 19 |
Intangible assets | 752 |
Other assets | 85 |
Total assets acquired | 2,484 |
Liabilities assumed |
Accounts payable, accrued expenses and other | 143 |
Advanced deposits | 40 |
Debt | 162 |
Non-recourse debt | 606 |
Operating lease liabilities | 20 |
Deferred revenue | 19 |
Deferred income tax liabilities | 338 |
Total liabilities assumed | 1,328 |
Net assets acquired | $ | 1,156 |
Total consideration transferred | $ | 1,556 |
Less: Net assets acquired | (1,156) |
Plus: Noncontrolling interest | 140 |
Goodwill(1) | $ | 540 |
(1)Goodwill is calculated as total consideration transferred less net assets acquired and it primarily represents the value that we expect to obtain from synergies and growth opportunities from our combined Company post-acquisition. The measurement period adjustments recorded during the nine months ended September 30, 2024 resulted from changes to our estimates of the fair value of the acquired assets, assumed liabilities and noncontrolling interest based on management’s review of the historical accounting records and third-party valuations. The measurement period adjustments recorded during the nine months ended September 30, 2024 resulted primarily from a reduction to timeshare financing receivables of $17 million and an increase to inventory of $69 million based on management's review of key assumptions and historical performance of the acquired portfolio, a decrease in the marketing agreement intangible asset of $55 million driven by a modification to the projected cash flows, decreases to our estimates of the fair value of property plant and equipment of $42 million and capitalized software of $5 million, and a decrease in noncontrolling interest of $18 million resulting from a change in the projected cash flows. These adjustments resulted in a net increase to goodwill for the period of $17 million, net of tax impacts of $10 million. There were measurement period adjustments not impacting goodwill for the nine months ended September 30, 2024, primarily due to management's review of historical accounting records and alignment of policies. These adjustments primarily consisted of $13 million from Cash and cash equivalents to Accounts payable, accrued expenses and other and $39 million from Deferred revenue to Advanced deposits. The prior period net income effect associated with the measurement period adjustments recorded during the nine months ended September 30, 2024 was $(4) million. Timeshare Financing Receivables We acquired timeshare financing receivables, net which consist of loans to customers who purchased vacation ownership products and chose to finance their purchases. These timeshare financing receivables, net are collateralized by the underlying VOIs and generally have 10-year amortizing repayment terms. We preliminarily estimated the fair value of the timeshare financing receivables using a discounted cash flow model, which calculated a present value of expected future risk-adjusted cash flows over the remaining term of the respective timeshare financing receivables. We are continuing to evaluate the significant assumptions underlying the discounted cash flow model including default severity and prepayment assumptions, which could result in changes to our preliminary estimate. We have determined that the entire acquired timeshare financing receivables portfolio was considered purchase credit deteriorated (“PCD”) assets as it shows evidence of more-than-insignificant deterioration in credit quality since origination. See Note 6: Timeshare Financing Receivables, net for additional information. Acquired timeshare financing receivables with credit deterioration as of the Bluegreen Acquisition Date were as follows:
($ in millions) | As of January 17, 2024
Purchase price | $ | 907 |
Allowance for credit losses | 220 |
Premium attributable to other factors | (169) |
Par value | $ | 958 |
Inventory We acquired inventory which primarily consists of completed unsold VOIs. We preliminarily estimated the fair value of acquired inventory using a discounted cash flows method, which included an estimate of cash flows expected to be generated from the sale of VOIs. Significant estimates and assumptions impacting the fair value of the acquired inventory that are subjective and/or require complex judgments include our estimates of operating costs and margins, and the discount rate. Certain other estimates and assumptions impacting the fair value of the acquired inventory involving less subjective and/or less complex judgments include: short-term and long-term revenue growth rates and other factors impacting the discounted cash flows. We are continuing to assess the market assumptions and property conditions as of the Bluegreen Acquisition Date, which could result in changes to these preliminary values. Property and Equipment We acquired property and equipment, which includes land, buildings and improvements, leasehold improvements, computer hardware and software, furniture, fixtures, and office equipment, machinery and equipment, vehicles, construction in progress, and other assets. For our preliminary analysis, we estimated the fair value of the property and equipment using a mix of cost and market approaches. In determining the fair value using the cost approach, we estimated the reproduction cost by applying inflation trending indices to the historical capitalized costs within the fixed asset details. We also relied on the market approach to determine the fair value of certain assets. In applying the market approach to value, we relied on the percent of cost method. In addition, certain property and equipment assets were held at their carrying value, which is our best estimate of fair value at this time given the information available. We are continuing to assess the market assumptions and property conditions as of the Bluegreen Acquisition Date, which could result in changes to these preliminary values. Operating Lease Right-of-Use-Assets and Lease Liabilities We have recorded a preliminary estimate of the liability for those operating leases assumed in connection with the Bluegreen Acquisition with a remaining term in excess of one year. We measured the lease liabilities assumed at the present value of the remaining contractual lease payments based on the guidance in Accounting Standards Codification Topic 842: Leases discounted at an incremental borrowing rate applicable to HGV determined as of the Bluegreen Acquisition Date. The right-of-use assets for such leases were measured at an amount equal to the lease liabilities, adjusted for the favorable or unfavorable leasehold position considering the contractual terms of the lease when compared with market terms. A small number of operating lease right of use assets and lease liabilities were preliminarily estimated at carrying value. Additionally, any equipment lease was held at carrying value. We continue to assess the market assumptions as of the Bluegreen Acquisition Date, which could result in changes to our preliminary estimate. Intangible Assets The following table presents our preliminary estimates of the fair values of the acquired Bluegreen’s identified intangible assets and their related estimated useful lives:
| Weighted Average Estimated Useful Life (in years) |  | Estimated Fair Value ($ in millions)
Trade name | 7 |  | $ | 30 |
Management contracts | 19 |  | 479 |
Club member relationships | 11 |  | 36 |
Capitalized software | 3 |  | 7 |
Marketing agreements | 17 |  | 154 |
Other contract-related intangible assets | 12 |  | 46 |
Total intangible assets acquired |  |  | $ | 752 |
We preliminarily estimated the fair value of Bluegreen’s trade name using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value. We preliminarily estimated the value of management contracts and club member relationships using the multi-period excess earnings method, which is a variation of the income approach. This method estimates an intangible asset’s value based on the present value of the incremental after-tax cash flows attributable to the intangible asset. The marketing agreements were valued using the with‑and‑without method of the income approach. Under this method, the value of an asset is a function of the differential of projected cash flows with the asset in place and the projected cash flows without the asset in place, discounted to present value. We continue to review Bluegreen’s contracts and historical performance in addition to evaluating the assumptions impacting the estimated values of such intangible assets and their respective useful lives, including the discount rate applied to the estimated cash flows and renewal and growth estimates and expected margins as of the Bluegreen Acquisition Date, which could result in changes to these preliminary values. Debt As part of the acquisition and consideration transferred, we paid off $265 million of Bluegreen’s existing corporate debt and accrued interest. We preliminarily estimated the fair value of the remaining assumed debt using a discounted cash flow model under the income approach. The significant assumptions include prepayment rates, interest rates and other structural factors. We are continuing to evaluate the significant assumptions underlying the discounted cash flow model as of the Bluegreen Acquisition Date, which could result in changes to our preliminary estimate. Non-Recourse Debt We preliminarily estimated the fair value of the securitized debt and warehouse loan facilities, using a discounted cash flow model under the income approach. The significant assumptions in our analysis include default rates, prepayment rates, bond interest rates and other structural factors. We are continuing to evaluate the significant assumptions underlying the discounted cash flow model as of the Bluegreen Acquisition Date, which could result in changes to our preliminary estimate. Deferred Revenue Deferred revenue primarily relates to deferred sales incentives revenues, including Bonus Points, which are deferred and recognized upon redemption; and Club membership fees, which are deferred and recognized over the terms of the applicable contract term or membership on a straight-line basis. We preliminarily estimated the fair value of the deferred revenue at the carrying value of such liabilities as of the Bluegreen Acquisition Date. We continue to review Bluegreen’s contracts as of the Bluegreen Acquisition Date, which could result in changes to the preliminary estimate. Deferred Income Taxes Deferred income taxes primarily relate to the fair value of assets and liabilities acquired from Bluegreen, including timeshare financing receivables, inventory, property and equipment, intangible assets, and debt. We preliminarily estimated deferred income taxes based on the blended U.S. federal and state statutory tax rate which approximates to 25%. Within the measurement period, we will continue to assess the tax rates used, and we will update our estimate of deferred income taxes based on changes to our preliminary valuations of the related assets and liabilities and refinement of the effective tax rates as of the Bluegreen Acquisition Date, which could result in changes to these preliminary values. Noncontrolling Interest The acquired noncontrolling interest relates to Bluegreen/Big Cedar Vacations, LLC, a joint venture in which we are deemed to hold a controlling financial interest based on our 51% equity interest, our active role as the day-to-day manager of its activities, and our majority voting control of its management committee. We preliminarily estimated the fair value of the noncontrolling interest using a discounted cash flow model. We continue to assess the market assumptions as of the Bluegreen Acquisition Date, which could result in changes to our preliminary estimate. Goodwill We have recorded a preliminary estimate of $540 million of goodwill in connection with the Bluegreen Acquisition. We have allocated the acquired goodwill to our segments, Real Estate Sales and Financing and Resort Operations and Club Management, as indicated in the table below. Our allocations may change throughout the measurement period as we continue to finalize the fair value of assets acquired and liabilities assumed in the Bluegreen Acquisition. The majority of goodwill is not expected to be deductible for tax purposes.
| Resort Operations and Club Management Segment |  | Real Estate Sales and Financing Segment |  | Total Consolidated
Goodwill | $ | 183 |  |  | $ | 357 |  |  | $ | 540 |
Pro Forma Results of Operations The following unaudited pro forma information presents the combined results of operations of HGV and Bluegreen as if we had completed the Bluegreen Acquisition on January 1, 2023, the first day of our 2023 fiscal year, but using our preliminary fair values of assets and liabilities as of the Bluegreen Acquisition Date. These unaudited pro forma results do not reflect any synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Bluegreen Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations.
| Nine Months Ended September 30,
($ in millions) | 2024 |  | 2023
Revenue | $ | 3,743 |  |  | $ | 3,747 |
Net income | 34 |  |  | 197 |
Bluegreen Results of Operations The following table presents the results of Bluegreen operations included in our unaudited condensed consolidated statement of operations for the period from the Bluegreen Acquisition Date through September 30, 2024:
($ in millions) | January 17, 2024 to September 30, 2024
Revenue | $ | 679 |
Net loss | (9) |
Grand Islander Acquisition On December 1, 2023 (“Grand Islander Acquisition Date”), the Company completed the acquisition of BRE Grand Islander Parent LLC (“Grand Islander”), by exchanging 100% of the outstanding equity interests of Grand Islander for $117 million (the “Grand Islander Acquisition”). Prior to the acquisition, we managed the resort property in Hawaii owned by Grand Islander. The acquisition expands our product offerings and provides existing members upgrade opportunities to locations outside of the prior Fee-for-service arrangement. The purchase price of $117 million included cash consideration, as well as $4 million of non-cash consideration attributable to the effective settlement of a pre-existing relationship based on the contract value. As of September 30, 2024, the preliminary fair values of the assets acquired includes $8 million of cash and cash equivalents, $28 million of restricted cash, $5 million of accounts receivable, $53 million of unsecuritized timeshare financing receivables, net, $199 million of securitized timeshare financing receivables, net, $15 million of inventory, and $2 million of other assets. Of the securitized timeshare financing receivables acquired, $128 million is used as collateral to secure a non-recourse revolving timeshare receivable credit facility (“Grand Islander Timeshare Facility”). The preliminary fair values of the liabilities assumed consist of $193 million of non-recourse debt and $4 million of other liabilities. The estimated fair values of the assets acquired, and liabilities assumed and the related preliminary acquisition accounting were based on management’s estimates and assumptions, as well as other information compiled by management. We preliminarily estimated the fair value of the timeshare financing receivables and inventory using a discounted cash flow model, which calculated a present value of expected future risk-adjusted cash flows over the remaining term of the respective timeshare financing receivable and the sell-out period of the inventory, respectively. For non-recourse debt, we estimated the fair value using recent trades of the debt, using adjustments to recent trades of similar debt or the settlement amounts for debt that was repaid in close proximity to the Grand Islander Acquisition Date. The timeshare financing receivables acquired were considered PCD assets. The following table presents the acquired assets with credit deterioration as of the Grand Islander Acquisition Date:
($ in millions) | As of December 1, 2023
Purchase price | $ | 252 |
Allowance for credit losses | 24 |
Premium attributable to other factors | (2) |
Par value | $ | 274 |
Goodwill of $4 million is calculated as total consideration transferred less net assets acquired. The measurement period adjustments recorded during the nine months ended September 30, 2024 resulted from changes to our estimates of the fair value of the acquired assets and assumed liabilities based on updates to preliminary valuations of acquired timeshare financing receivables and inventory. These resulted in an increase to goodwill for the period of $2 million. We have allocated the acquired goodwill of $4 million to our Real Estate Sales and Financing segment. Our allocations may change throughout the measurement period as we continue to finalize the fair value of assets acquired and liabilities assumed in the Grand Islander Acquisition, not to exceed one year from the Grand Islander Acquisition Date. The majority of goodwill is expected to be deductible for tax purposes.

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