Proposal 1: The Share Repurchase Proposal
The Company is proposing to grant the Board the authority to approve and implement additional repurchases of shares of the Company’s common stock, subject to the qualification that the Company will not repurchase additional shares if Hill Path’s common stock ownership interest percentage would, as a result of any such repurchase, equal or exceed 70% (excluding Hill Path’s and its affiliates’ existing non-voting derivative positions). Implementation of such program, if approved, including the timing, amount and other parameters thereof, will be determined by the Company from time to time.
Approval of the Share Repurchase Proposal requires the Disinterested Stockholder Approval. Subject to approval of the Share Repurchase Proposal by the Disinterested Stockholders, the Board has authorized a program to repurchase shares of the Company’s common stock for up to $500 million in the aggregate. If the Share Repurchase Proposal is approved by the Disinterested Stockholders, the Company does not intend to seek the Disinterested Stockholder Approval in connection with adoption by the Board of any future share repurchase, so long as such repurchases do not result in Hill Path’s common stock ownership interest percentage equaling or exceeding 70% (excluding Hill Path’s and its affiliates’ existing, non-voting derivative positions).
Background of the Proposal
As part of the Company’s ongoing consideration and evaluation of its long-term strategic goals and plans, the Board and the Company’s senior management periodically review, consider, and assess the Company’s capabilities, operations, financial performance, business plans and prospects, as well as overall industry conditions, opportunities and risks for the Company as they may affect those strategic goals and plans. This review includes, among other matters, the consideration of potential opportunities for business combinations, uses of cash, capital allocation strategies, acquisitions, divestitures, strategic partnerships, and other financial and strategic alternatives. As part of this ongoing process, the Board takes into account the views and feedback of the Company’s investors received from time to time, including with respect to share repurchases.
The Company has historically authorized open-market share repurchases from time-to-time when it has believed the Company’s shares were undervalued by the market and the returns that could be achieved from such purchases were attractive. From 2022 through 2024, the Board considered the impact that additional share repurchases would have on Hill Path’s share ownership percentage if Hill Path did not participate in such repurchases, and the potential governance implications resulting therefrom. On September 18, 2023, the Board formed a special committee (the “Prior Special Committee”) to consider whether to recommend additional share repurchases to the Board, and if so, under what conditions.
Following extensive discussions and negotiations among the Prior Special Committee, the Board, Hill Path and their respective representatives, the Prior Special Committee recommended to the Board that it adopt and approve (i) a February 27, 2024 amendment (the “Amendment”) to the Stockholders Agreement, dated May 17, 2019, by and between Hill Path and the Company (the “Stockholders Agreement”); and (ii) authorization of a new $500.0 million share repurchase program of the Company’s common stock, subject to the qualification that the Company would not repurchase additional shares if Hill Path’s common stock ownership interest percentage would, as a result of any such repurchase, equal or exceed 50% (excluding Hill Path’s and its affiliates’ non-voting derivative positions) (the “2024 Share Repurchase Authorization”), in each case subject to the approval by the holders of a majority of shares of the Company’s common stock, other than any such shares owned by Hill Path or an affiliate of Hill Path (including James. P. Chambers who, for purpose of the Amendment and the Stockholders Agreement, would be deemed to be an affiliate of Hill Path) or Nomura Global Financial Products Inc., as derivative counterparty to Hill Path or its affiliates. The Board adopted and approved the Amendment and the 2024 Share Repurchase Authorization and directed that they be submitted to the Company’s Disinterested Stockholders for approval. The Company proceeded to hold a special meeting of its stockholders on March 25, 2024 (the “2024 Special Meeting”).
At the 2024 Special Meeting, the Company submitted two proposals: first, adoption and approval of the Amendment (the “2024 Amendment Proposal”); and second, the 2024 Share Repurchase Authorization (the “2024 Share Repurchase Proposal”, together with the 2024 Amendment Proposal, the “2024 Special Meeting Proposals”). Approval of the 2024 Amendment Proposal was conditioned upon approval of the 2024 Share Repurchase Proposal, and vice versa.
