Diamond Acquisition (Tables)

9 Months Ended

Sep. 30, 2021

Business Combinations [Abstract]

Schedule of Fair Value of Consideration Transferred

The following table presents the fair value of each class of consideration transferred in relation to the Diamond Acquisition at the Acquisition Date.

($ in millions, except stock price amounts)
HGV common stock shares issued for outstanding Diamond shares		33.93
HGV common stock price as of Acquisition Date(1)		40.71
Stock purchase price	$	1,381
Repayment of Legacy-Diamond debt	$	2,029
Total consideration transferred	$	3,410

(1) Represents the average of the opening and closing price of HGV stock on August 2, 2021.

Schedule of Preliminary Fair Values of Assets Acquired and Liabilities Assumed

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 period; (5) finalizing the review and valuation of other acquired assets and assumed liabilities, including debt assumed; and (6) finalizing our estimate of the impact of purchase accounting on deferred income tax liabilities.

($ in millions)
Assets acquired
Cash and cash equivalents	$	314
Restricted cash		130
Accounts receivable, net of allowance for doubtful accounts		58
Timeshare financing receivables, net		841
Inventory		745
Property and equipment, net		307
Operating lease right-of-use assets, net		30
Intangible assets, net		1,906
Other assets		243
Total assets acquired	$	4,574
Liabilities assumed
Accounts payable, accrued expenses and other	$	448
Debt, net		14
Non-recourse debt, net		661
Operating lease liabilities		33
Advanced deposits		4
Deferred revenues		173
Deferred income tax liabilities		651
Total liabilities assumed	$	1,984
Net assets acquired	$	2,590
Total consideration transferred	$	3,410
Goodwill(1)	$	820

(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. We have not completed the assignment of goodwill to reporting units or to our reportable segments as of September 30, 2021. The majority of goodwill is not expected to be deductible for tax purposes.

Schedule of Financing Receivables

Acquired timeshare financing receivables with credit deterioration as of the Acquisition Date were as follows:

($ in millions)	As of August 2, 2021
Purchase price	$	841
Allowance for credit losses(1)		469
(Premium) attributable to other factors		(69	)
Par value	$	1,241

Schedule of Preliminary Estimates Of The Fair Value of Intangible Assets and Estimated Remaining Useful Lives

The following table presents our preliminary estimates of the fair values of the acquired Diamond’s identified intangible assets and their related estimated remaining useful lives.

	Estimated Fair		Estimated
	Value		Useful Life
	($ in millions)		(in years)
Trade name	$	20		1.0
Management contracts		1,263	17.5
Club member relationships		146		10.0
Vacation ownership customer relationships		463	5.5
Computer software		14		1.5
Total intangible assets	$	1,906

Schedule of Acquisition Pro Forma Information

The following unaudited pro forma information presents the combined results of operations of HGV and Diamond as if we had completed the Diamond Acquisition on January 1, 2020, the first day of our 2020 fiscal year, but using our preliminary fair values of assets and liabilities as of the 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 Diamond 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, except per share data)	2021		2020
Revenues	$	2,321	$	1,431
Net income (loss)		173		(307	)

Summary of Diamond Results of Operations

The following table presents the results of Diamond operations included in our unaudited condensed consolidated statement of operations for the period from the Acquisition Date through the end of the third quarter of 2021.

($ in millions)	August 2, 2021 to  September 30, 2021
Revenue	$	245
Net income		30