STAMFORD, CT—Starwood Hotels & Resorts Worldwide Inc. said Tuesday it would spin off its timeshare business, Starwood Vacation Ownership, into a separate publicly traded company, helping to further the company's “asset light” strategy. It will bring back Matthew Avril, who retired as president of Starwood's Hotel Group in 2012, to lead the spinoff, the name of which will be determined over the next few months.

The new business, which will continue to be headquartered in Orlando, would aim to become “the premier upper upscale timeshare company,” Starwood says. It would enter into a new long-term license agreement with Starwood for current and future timeshare properties to retain affiliation with the Westin and Sheraton brands. It would also seek expansion of its existing 22 developments.

Starwood's president and CEO, Frits van Paasschen, says now is “the right time for us to spin-off our vacation ownership business and move Starwood forward in its asset light strategy. Not only does SVO continue to have a great outlook for growth, but valuations for timeshare companies are at attractive levels.”

Separating the timeshare business, van Paasschen says, will allow Starwood “to continue participating in this growth industry through a fee-based business model, as we do with our managed and franchised hotel business. This transaction puts us in a position to build on the strength of our brands to fuel growth and create shareholder value for both companies.”

As a standalone business, the as-yet nameless timeshare entity will have ready access to capital to invest in both existing and potential new properties, he adds. “Likewise, it will provide an opportunity for shareholders to invest in two pure-play companies with complementary investment propositions."

The spin-off is expected to be tax-free to Starwood shareholders, and will be effected through a pro rata distribution of the new entity's stock to existing Starwood shareholders. Citigroup Global Markets Inc. and Credit Suisse are acting as financial advisors.