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Sun Setting on Sunterra
http://www.fool.com/news/mft/2006/mft06091511.htm
By Rich Duprey (TMF Cop)
09/15/2006
For timeshare operator Sunterra (OTC BB: SNRR.PK), it's only a matter of time. The "For Sale" sign has been hung out, and it has plenty of advisors telling it what its next moves should be.
Earlier this year, Sunterra became embroiled in an accounting probe of its soon-to-be-sold European division and was delisted from the Nasdaq exchange. Its stock now trades on the Pink Sheets. It could presumably be reinstated if it comes into compliance with the exchange's regulations -- for example, by filing its financial reports. The company subsequently booted its CEO and brought in Mackinac Partners (over the objections of Chapman Capital, one of its largest shareholders) to run the ship.
The company hired Mackinac Partners founder James Weissenborn to run the company at a cost of $85,000 per month, plus an incentive bonus if the stock's price reaches $15 per share. Then it hired Merrill Lynch(NYSE:MER) to advise it on a potential sale of the entire company. It brought on Chanin Capital Partners to give it some pointers on stripping the company down to its bare essentials; Chanin is now brokering a deal to sell off Sunterra's European operations. Now it has brought in a new company, Alvarez & Marsal, for "management services," for which it will pay $90,000 per month and also offer an incentive bonus if the stock reaches the magical $15 a share. At the same time, it is reducing -- but not eliminating -- the responsibilities and pay of Weissenborn and Mackinac Partners.
Sunterra has also not been lacking for unsolicited advice from some large shareholders, like Chapman Capital, CD Capital Management, and Third Point LLC. All three advocate an immediate, outright sale of the company. That's not surprising, really, considering they're looking to quickly maximize the value of their stock holdings. While the stock currently trades for around $11-$12 a share, they believe the company could reasonably be sold between $14 and the high teens.
But although it's one of the largest operators in the timeshare business -- a company that gives guidance to people on whether they should buy or sell vacation ownership packages -- Sunterra can't seem to decide what it should do with itself. While Sunterra has been able to increase the number of families owning timeshares to more than 300,000 since it emerged from bankruptcy in 2002, it looks like once the company is shorn of its unproductive assets, it will make a tempting takeover target for someone.
Timeshares – or, as they like to term themselves, vacation ownership interests (VOI) -- build resorts in destination spots and sell each condominium unit 52 times, as most timeshares are for one week. The VOI then retains ownership of the land and is paid a maintenance fee by each condo owner. It can be a profitable business, so much so that hotel operators like Hilton(NYSE:HLT) and Marriott(NYSE:MAR) even have timeshare units which have helped boost their profits. Such established corporations' entrance into the business has helped the industry rise above the stench associated with its earlier image as a collection of hucksters and snake-oil salesmen.
Possible suitors of the ailing VOI could include Wyndham(NYSE:WYN), an operator of hotels and timeshare resorts worldwide. Other timeshare operators include Bluegreen(NYSE:BXG) and ILX Resorts(AMEX:ILX). Bluegreen is about half the size of Sunterra, in terms of families owning timeshares, but it's not a pure timeshare operator like the much smaller ILX, as it also builds residential communities in four southern states. ILX, with a market cap of about $33 million, would probably be unable to come up with sufficient financing.
Whether it ends up being bought by another VOI or a hotel chain, it seems certain that the sun is setting on Sunterra.
http://www.fool.com/news/mft/2006/mft06091511.htm
By Rich Duprey (TMF Cop)
09/15/2006
For timeshare operator Sunterra (OTC BB: SNRR.PK), it's only a matter of time. The "For Sale" sign has been hung out, and it has plenty of advisors telling it what its next moves should be.
Earlier this year, Sunterra became embroiled in an accounting probe of its soon-to-be-sold European division and was delisted from the Nasdaq exchange. Its stock now trades on the Pink Sheets. It could presumably be reinstated if it comes into compliance with the exchange's regulations -- for example, by filing its financial reports. The company subsequently booted its CEO and brought in Mackinac Partners (over the objections of Chapman Capital, one of its largest shareholders) to run the ship.
The company hired Mackinac Partners founder James Weissenborn to run the company at a cost of $85,000 per month, plus an incentive bonus if the stock's price reaches $15 per share. Then it hired Merrill Lynch(NYSE:MER) to advise it on a potential sale of the entire company. It brought on Chanin Capital Partners to give it some pointers on stripping the company down to its bare essentials; Chanin is now brokering a deal to sell off Sunterra's European operations. Now it has brought in a new company, Alvarez & Marsal, for "management services," for which it will pay $90,000 per month and also offer an incentive bonus if the stock reaches the magical $15 a share. At the same time, it is reducing -- but not eliminating -- the responsibilities and pay of Weissenborn and Mackinac Partners.
Sunterra has also not been lacking for unsolicited advice from some large shareholders, like Chapman Capital, CD Capital Management, and Third Point LLC. All three advocate an immediate, outright sale of the company. That's not surprising, really, considering they're looking to quickly maximize the value of their stock holdings. While the stock currently trades for around $11-$12 a share, they believe the company could reasonably be sold between $14 and the high teens.
But although it's one of the largest operators in the timeshare business -- a company that gives guidance to people on whether they should buy or sell vacation ownership packages -- Sunterra can't seem to decide what it should do with itself. While Sunterra has been able to increase the number of families owning timeshares to more than 300,000 since it emerged from bankruptcy in 2002, it looks like once the company is shorn of its unproductive assets, it will make a tempting takeover target for someone.
Timeshares – or, as they like to term themselves, vacation ownership interests (VOI) -- build resorts in destination spots and sell each condominium unit 52 times, as most timeshares are for one week. The VOI then retains ownership of the land and is paid a maintenance fee by each condo owner. It can be a profitable business, so much so that hotel operators like Hilton(NYSE:HLT) and Marriott(NYSE:MAR) even have timeshare units which have helped boost their profits. Such established corporations' entrance into the business has helped the industry rise above the stench associated with its earlier image as a collection of hucksters and snake-oil salesmen.
Possible suitors of the ailing VOI could include Wyndham(NYSE:WYN), an operator of hotels and timeshare resorts worldwide. Other timeshare operators include Bluegreen(NYSE:BXG) and ILX Resorts(AMEX:ILX). Bluegreen is about half the size of Sunterra, in terms of families owning timeshares, but it's not a pure timeshare operator like the much smaller ILX, as it also builds residential communities in four southern states. ILX, with a market cap of about $33 million, would probably be unable to come up with sufficient financing.
Whether it ends up being bought by another VOI or a hotel chain, it seems certain that the sun is setting on Sunterra.
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